Following a consultation on the Securities and Futures (Short Position Reporting) Rules in May (Note 1), the Securities and Futures Commission (SFC) today announces the conclusions and further consults the public on the matter.
Noting the industry’s feedback about difficulties in reporting short positions on a gross basis, the SFC proposes to revise the rules to require reporting of net short positions. The SFC now invites comment on the rules thus modified.
“In view of the feedback, requiring the market to report short positions on a net basis would be the more pragmatic course of action to progress the SFC’s goal in enhancing its ability to access data on short positions and monitor short selling activities in the Hong Kong market; and to provide the market with more information about short selling activities, without placing undue burden on the industry,” said Mr Ashley Alder, the SFC’s Chief Executive Officer.
“It is more efficient to ask the market to provide data that they already have or can leverage off from their existing infrastructure than having to re-configure their systems to report something new. Hong Kong already has a very robust short selling regime,” Mr Alder added.
Other than the aforesaid, the SFC will be adopting the rules as proposed in the May consultation. Guidance on reporting will be provided in due course to provide more information on compliance with the new reporting requirement.
Subject to the legislative process, the SFC targets to implement the short position reporting requirement by the end of the first quarter of 2012.
Interested parties are invited to submit their comments on the further consultation on the rules by 4 November 2011. Comments may be submitted online via the SFC website (www.sfc.hk), by e-mail to shortpositions@sfc.hk, by post or by fax to 2521 7917.
Notes:
- On 25 May 2011, the SFC published the Consultation on Securities and Futures (Short Position Reporting) Rules. The consultation closed on 30 June 2011.
- Under the rules in the May consultation, a gross short position that hits the threshold of 0.02% of the issued share capital of a listed company, or a market value of $30 million, whichever is lower, has to be reported to the SFC on a weekly basis. In general, the party who beneficially owns the short position will be responsible for the reporting. Only short positions in the constituent stocks of the Hang Seng Index, the Hang Seng China Enterprises Index and other financial stocks specified by the SFC will be subject to reporting. The reporting requirement may be tightened to further enhance transparency and monitoring in contingency situations. The SFC will provide an electronic reporting facility and a report template. The SFC will publish aggregated short positions of each stock a week after the receipt of the reports.
