F. FAQs on BCAN generation and assignment

Q1 :
Can we use the same BCAN for a client which comes under both the HKIDR and NB Investor ID Regime?

A: Yes, an RRI may opt to (but is not obliged to) apply the same BCAN to a client under the HKIDR and the NB Investor ID Regime, provided that the BCAN for the HKIDR remains compliant with the requirements set out in the HKEX Information Paper. RRIs are reminded to insert its CE number as a prefix before the BCAN for placing orders under the HKIDR and for submission of the BCAN-CID Mapping File. For details, please refer to paragraphs 103 – 106 of the Consultation Conclusions.

Q2 : We are an asset management company licensed for Type 9 regulated activity. We do not provide securities brokerage services for another person and do not carry out proprietary trading. Are we required to assign BCAN to ourselves or to the funds and discretionary accounts under our management? Are we required to prepare and submit BCAN-CID Mapping File to SEHK? Are we required to enhance our systems to tag BCAN to the relevant orders?

The requirements under the HKIDR under paragraph 5.6 of the Code of Conduct only apply to “Relevant Regulated Intermediaries”, which means a licensed corporation or a registered institution which:

i. submits (or arranges to submit) for execution an on-exchange order;

ii. carries out an off-exchange order; or

iii. reports an off-exchange trade directly as an exchange participant to SEHK according to its rules,

in connection with: (i) carrying out proprietary trading; or (ii) providing securities brokerage services for another person in respect of orders placed through an account opened and maintained for that person.

Whether that licensed corporation should tag a BCAN to an order depends on the capacity in which it acts. If a licensed corporation does not engage in any of the above activities (regardless of whether it is licensed for Type 1 or Type 9 or other types of regulated activities), it is not an RRI and is not required to assign BCAN to itself or other persons, tag BCAN to the relevant orders, or prepare and submit a BCAN-CID Mapping File to SEHK.

Q3 : In some cases, the order originator of a securities trading order and the account holder may not be the same person, e.g. an authorised trader (the order originator) is authorised to place orders with an RRI on behalf of an account holder; an investment manager (the order originator) places orders with an RRI through an account opened and maintained in the name of a custodian (the account holder); or an external asset manager (the order originator) places orders with an RRI on behalf of an account holder. In these three cases, should the RRI assign BCANs to the order originators or to the account holders?

A: Paragraph 5.6(c) of the Code of Conduct (as set out in Appendix C to the Consultation Consultations) requires an RRI to assign a BCAN to each of its clients, save in the case of an order being placed from a jointly held securities trading account where the BCAN should be assigned to the account itself. “Client” is defined under paragraph 5.6(m) of the Code of Conduct to generally mean the direct client of an RRI, and “direct client” is defined under paragraph 5.6(b)(v) as the most immediate client of an RRI which has placed or proposes to place an on-exchange order or off-exchange order through a securities trading account with that RRI. Therefore, the RRI should assign BCANs to each of these account holders (or in the case of jointly held accounts, the accounts) (but not to the order originators) and collect CID of each of these account holders in these three cases.

In respect of BCAN assignment in the case of discretionary account management, please refer to paragraphs 69 to 73 in the Consultation Conclusions.

Q4 : We are an asset management company licensed for Type 9 regulated activity and we conduct central dealing desk activities for our affiliates. Do we need to assign BCANs to our affiliates?

As explained in paragraphs 39-46 of the Consultation Conclusions, an LC or RI may be licensed or registered for multiple regulated activities. Whether the asset management company should be responsible for assignment of BCANs depends on the capacity in which it handles a securities order, i.e. whether or not it is acting in the capacity of an RRI. Please refer to the definition of “relevant licensed or registered person” in paragraph 5.6(b)(xiv) of the Code of Conduct (as set out in Appendix C to the Consultation Conclusions).

In the case where the asset management company does not open and maintain securities trading accounts for its affiliates in relation to its central dealing desk activities, which are wholly incidental to the asset management activities of itself or its affiliates, the asset management company is not an RRI by virtue of its central dealing desk activities under such circumstance and it is not required to assign BCANs to its affiliates.

Last update: 21 Jan 2022