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In a set of consultation conclusions released on 2 March, the Securities and Futures Commission (SFC) announced that after taking into account industry feedback and the domestic market situation, it will introduce a short-position reporting regime to enhance transparency of short-selling activities in Hong Kong.
The SFC received 21 responses from market participants to its 31 July 2009 consultation paper on increasing short-selling transparency which discussed two possible approaches: enhancing the existing transactional reporting regime and implementing a new short-position reporting model.
“A build-up of large short positions may be potentially disruptive to market stability,” said the SFC’s Chief Executive Officer Mr Martin Wheatley. “A short-position reporting regime will not only complement Hong Kong’s robust short-selling regulatory framework but will also provide a more complete picture of short-selling activities in our market.”
Under the proposed regime, the reporting obligation will be triggered if a short position is equal to or exceeds, 0.02% of the issued share capital of a listed company, or a market value of $30 million, whichever is lower. Weekly reports must be submitted to the SFC until the short position falls below both trigger levels. The SFC will publish aggregated short positions of each stock on an anonymous basis a week later.
The proposed short-position reporting regime will only be applicable to constituent stocks of the Hang Seng Index, the H-shares Index, financial stocks and other stocks specified by the SFC. Derivatives will not be included.
The new reporting model will be implemented by a new subsidiary legislation, on which the SFC will be consulting the public in due course.
