THE Hong Kong and Shanghai stock exchanges have published an overhaul of rules governing a new trading link that will open the Chinese mainland capital markets to the investing public, ahead of a launch that could take place as early as next month.

    The updated rules include measures that would allow for margin trading, or buying stocks using money borrowed from brokerages, via the new trading link. The exchanges, addressing concerns about “mischievous behavior” and “quota hogging,” will also implement a mechanism to prevent manipulation of daily trading limits, according to a circular sent to brokers Friday.

    Hong Kong’s exchange said buy orders at prices more than 3 percent below the current best bid, or last trade if there are no other bids, will be rejected. The 3 percent limit on buy orders may be adjusted over time depending on market conditions, the exchange said. Traders can’t amend buy orders through the link, the bourse said, adding that it would conduct an additional practice session to fully test its clearing systems, scheduled for October 11.

    The Shanghai-Hong Kong stock connect program will allow investors on the mainland to buy Hong Kong-listed stocks for the first time, while also allowing all types of overseas investors to buy shares on the Shanghai Stock Exchange. The link allows the equivalent of US$2.1 billion in daily net purchases of Shanghai shares and US$1.7 billion for Hong Kong.

    The link, part of China’s effort to open up its financial system and promote wider use of the yuan, will begin with limits on both daily and aggregate purchases as policymakers seek to maintain some control over capital flows.

    Reuters quoted two people with direct knowledge of the matter as saying Friday that trading could commence Oct. 27. However, the launch date for the stock connect program “has not been finalized,” said Scott Sapp, a spokesman for the Hong Kong Exchanges and Clearing. He declined to comment on press reports, citing company policy. (SD-Agencies)