China's securities regulator said Friday it will launch Delivery Versus Payment (DVP) reform on December 26 to bring the country's securities settlement system more in line with international practices and attract foreign capital.

The China Securities Regulatory Commission (CSRC) in January published draft securities settlement rules based on the principle of DVP, a global practice under which the settlement of stocks and cash occurs simultaneously. Once the participants default on the delivery of funds or securities, the securities registration and settlement organization can dispose of the funds or securities involved in the default.

Currently, in China's equity market, stocks are settled on the day they are traded, but cash settles the next day.

The reform will keep existing practices unchanged, but use labeling to correlate securities delivery and payment, and make clear how to deal with breaches of contract, the CSRC said.

It will not have any impact on investment and trading, but will make the settlement system more secure, and "further attract foreign capital into China's market," the watchdog said.

(With input from Reuters; cover via CFP)