Bond Connect Market Practice SWIFT Asia Pacific July 2017

Bond Connect Description Bond connect, in SMPG operational post-trade market practice terms, is a CSD-CSD settlement. It means that settlement takes place through a link established between an investor CSD (CMU) and an issuer CSD (CCDC or SHCH). It results that for flows between foreign investors (eg, Asset Managers) and their (global and/or local) custodians, there will be a need to identify both CSDs to ensure proper routing of settlement, ie, via the bond connect rather than through domestic set-up. This will be done in ISO 15022 through the use of :94F::SAFE and :95P::PSET. PSET is always where the counterparty is located. PSAFE where the instructing party is located. Both fields have no legal or regulatory meanings, only operational usage. The following slides will illustrate how these fields need to be used. Note that in ISO 20022, it is easier. Delivering and receiving depositories are to be used (not place of safekeeping).

Receiving Delivering Depository and Place of Safekeeping Bond Connect Settlement: BUYING Example (CCDC) BUYRGB22 provides the below settlement info to CUSTHKHH, which will be input in the instruction from CUSTHKHH to HKMAHKHC Delivering agent is DEAGCN22 Seller is SELLCN33 Place of settlement (Delivering agent’s CSD) Today the CMU guidance is to use NDCCCNB1. This will be change to NDCCCNBJ for the live BIC cutover of CCDC in the future. Place of safekeeping (Receiving agent’s CSD) is HKMAHKHC CFETS trade reference number Buyer BUYRGB22 Seller SELLCN33 Proprietary Msg MT 541 Custodian CUSTHKHH Clearing Agent DEAGCN22 Proprietary Msg MT 541 HKMA CMU HKMAHKHC CCDC / SHCH NDCCCNB1* MT 541/sese.023 or proprietary

ISO 15022 Illustrations From the buyer to custodian (global or sub) Sender: BUYRGB22 Receiver: CUSTHKHH :94F::SAFE//NCSD/HKMAHKHC and :95P::PSET// NDCCCNB1 allows the custodian to identify the settlement as a bond connect settlement. CBTnnnnnnnnnnnnnn is the CFETS Trade Reference Number NOTE: NDCCCNB1 is used as an example but will be replaced by NDCCCNBJ

ISO 15022 Illustrations From the receiving sub-custodian to HKMA for the settlement at CCDC MT 541 Sender: CUSTHKHH Receiver: HKMAHKHC 94F::SAFE//NCSD/HKMAHKHC and :95P::PSET// NDCCCNB1 allows the custodian to identify the settlement as a bond connect settlement. CBTnnnnnnnnnnnnnn is the CFETS Trade Reference Number NOTE: NDCCCNB1 is used as an example but will be replaced by NDCCCNBJ