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The Securities and Futures Commission (SFC) has taken note of the recent extreme price volatility in some stocks and related options in overseas markets and cautions investors on the risks of trading highly volatile securities, including overseas-listed stocks as investment discussion forums in social media gain prominence and become increasingly influential.
Investors should be aware that brokers may have rights under the terms and conditions of customer agreements to suspend trading services in some circumstances, including in the case of service suspension by overseas execution brokers. In this situation investors may not be able to open new positions or close out existing positions, which may result in unexpected losses within a short period.
Investors should carefully manage market risks arising in any very volatile market. In particular, brokers may need to revise the margin level for specific products within a very short period in order to properly manage their risk exposures and to meet settlement obligations to clearing houses or other execution brokers. Investors may be asked to meet immediate margin calls to cover their open positions and provide additional margin deposits or collateral.
The SFC is in close dialogue with local and overseas regulatory counterparts about investor risks in volatile stocks, and will work to ensure fairness and orderliness in our markets. The SFC will not hesitate to take regulatory action if there is evidence that intermediaries are not acting in the best interests of their clients and the integrity of the market.
