Defaulted Bond Transfer

This guidebook provides directions for the Transfer in Defaulted Bond on Maturity Service (“Service”), allowing investors registered with the Bond Connect Scheme (“Bond Connect Investors”) to trade defaulted bond on maturity in the China Interbank Bond Market. Bond Connect Investors who wish to participate should comply with the Rules for Transfer of Defaulted Bonds on Maturity in CIBM issued by CFETS and follow this guidebook for the procedures to service activation, trading, and settlement arrangements.

1. Service Activation

Bond Connect Investors can register for the Service by filing Risk Undertaking Letter to CFETS and Transfer in Defaulted Bond on Maturity at CFETS – Service Activation Form for Bond Connect (TDBM FORM 1) to: -

• Bond Connect Company Limited (“BCCL”) at service@chinabondconnect.com; or
• CFETS at liyuanlong@chinamoney.com.cn and dqwyz@chinamoney.com.cn.

Upon the receipt of the documents, BCCL or CFETS will provide feedback to Bond Connect Investors within two business days and confirm via email to those whose applications to activate the Service are successful.

2. Trading

Bond Connect Investors should submit the duly signed original copy of: -

• Contingency Transfer of Bond (Special Cash Bond) at CFETS – Application Form for Bond Connect (TDBM FORM 2); and
• Explanation Letter – including but not limited to full name of buyer and seller, bond name, bond code, trading purpose, pricing basis, quote record, statement of understanding all the risks arising from the trading and confirming whether there is any unlawful conduct in the trade, such as misrepresentation, fraud, insider dealing, and transfer of benefits etc.  

to BCCL or CFETS no later than 4:00pm (Hong Kong time) of the working day preceding the expected trading day. Bond Connect Investors are advised to engage BCCL or CFETS at an early stage so as to ensure the submission is of a valid order. BCCL or CFETS may request additional information from Bond Connect investors on a case by case basis.

Onshore market makers on the other hand should contact CFETS for order placement. On the condition that trade details are matched on the buy and sell sides for the defaulted bond on maturity, the trade will be executed on CFETS platform. BCCL will revert to Bond Connect Investors with a trade ticket generated by CFETS, the document that reflects a legally binding trade has been executed with regard to the defaulted bond on maturity.

 

The Service supports settlement cycle of T+1 and T+2 only. Relevant custodian banks are required to submit a subscription form to CMU before the settlement date of the first transaction on defaulted bond settlement according to the CMU operating procedure on a one-off basis. Bond Connect Investors are highly recommended to direct their custodian banks to send settlement instructions to CMU as soon as possible after the trade is executed. Such settlement instructions should arrive at CMU no later than 3:00pm (Hong Kong time) of the settlement day. In this connection, the CMU operating procedure of settlement recycling equally applies to defaulted bond settlement; Bond Connect Investors may contact their custodian banks for further detail.

CFETS charges investors a transaction-based fee at 0.00025% of the total amount, capped at RMB 1000 for each transaction. BCCL will provide Bond Connect Investors a bill of payment generated by CFETS on a quarterly basis for the total of such fees incurred during the quarter. Investors shall settle the bill directly with CFETS. BCCL takes no responsibility in facilitating or procuring the payment.

Should you have any enquiries, please contact BCCL or CFETS: -
     -  BCCL service@chinabondconnect.com
        Icy Shao icyshao@chinabondconnect.com, +852-23270732
     -  CFETS
        Li Yuanlong dqwyz@chinamoney.com.cn, +86-21-38585306