Standard Chartered to Pilot New Stock Connect Model

Standard Chartered plans to pilot a new ‘open access’ brokerage model for investors trading in the Shanghai-Hong Kong Stock Connect program at the end of March.

Under the new model, investors will be able to use Standard Chartered to connect to any broker for executing China A shares orders, and then use Standard Chartered for clearing and custody.

The new model will contrast the existing execution-to-custodian model offered by HSBC, Citi, and BNP Paribas whereby execution, clearing and custody is integrated into one platform.

“The great thing about this model is that it allows independent broker choice. Instead where you had a lock-in which your broker was also the custodian, under the new model you can use any broker and makes it look like any other market,” says Barnaby Nelson, regional head of Investors and Intermediaries for Northeast Asia and Greater China, Standard Chartered.

According to Nelson, as the only bank that is completely unaligned from a brokerage perspective, Standard Chartered has been “working to build out an open architecture model where our clients and our global custodian partners can get best execution.

“To have panel pre-integrated brokers with us, and especially with MiFID, the asset managers can demonstrate best execution. With banks that have a lock-in model, it is not going to be tenable to keep that.”

The next step for Standard Chartered is dealing with challenges over China’s T+0 settlement cycle for equities, especially for managers that are outside of the Asian time zones.

“In those cases, it will likely come down to us and the broker having very tight communications and a clear assignment of risk so we can manage the whole process if the global custodian or asset managers aren’t able to be part of the picture,” adds Nelson.

“So there’s a lot of work to have the global custodian and asset manager allow us to manage messaging process.”