China issued regulations on Chinese depositary receipts (CDRs) and global depositary receipts (GDRs) under the Shanghai-London Stock Connect scheme on Oct. 2.
Depositary receipts are being adopted by the stock connect scheme between Shanghai Stock Exchange (SSE) and London Stock Exchange (LSE) aiming at establishing a trading link between two separate stock exchanges.
According to the regulations, any overseas issuer who applies for the listing of CDRs on the SSE for the first time shall have an average market capitalization of no less than 20 billion yuan, per the closing price of the underlying shares, over 120 trading days prior to the offering application date, calculated at the middle price of the RMB exchange rate announced by China's central bank on the day prior to the offering application date.
Meanwhile, applicants should have been listed on the LSE for at least three years and have obtained a premium listing for at least one year.
Moreover, they shall seek the listing of no less than 50 million units of the CDRs representing no less than 500 million yuan of corresponding underlying shares at market value.
On the other hand, any overseas securities institution intending to engage in the cross-border conversion of their GDRs into the domestic market shall be a full member firm of the LSE.
The applicant itself or the entity it controls, by which it is managed, or with which it is under common control shall be a Qualified Foreign Institutional Investor (QFII), or an RMB Qualified Foreign Institutional Investor (RQFII) unless otherwise prescribed by the SSE.
The regulations also involve listing, trading, cross-border conversion, information disclosure of or in relation to CDRs and GDRs.
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