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China reforms securities settlement system to attract foreign capital -Breaking

by Mike Robinson

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© Reuters. FILE PHOTO : The China National Flag is displayed near the China Securities Regulatory Commission, (CSRC) building at Financial Street, Beijing. China’s July 16th 2020. REUTERS/Tingshu Wang

SHANGHAI (Reuters – China’s securities regulator announced Friday that the country will overhaul its securities settlement system in order to align with global best practices and attract foreign capital.

China Securities Regulatory Commission published draft rules to bring institutional trading into line with Delivery Versus Payment (DVP), a worldwide practice that allows for simultaneous settlements of cash and stocks.

China’s current equity market allows stocks to be settled immediately after they have been traded. Cash settles on the next day.

Investors around the world have hoped for China to reform its settlement system. ASIFMA, a financial industry body has stated that these differences can create extra costs and risk for foreign investors as well as their brokers.

Friday’s announcement by CSRC indicated that China’s retail investors will not be affected by the reform. The reform is meant to enhance safety in China’s securities settlement system and increase foreign money flows.

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