The Securities and Futures Commission (SFC) today published revised guidance on short selling reporting and stock lending record keeping to prepare for the launch of the HKD-RMB Dual Counter Model in the Hong Kong securities market (Note 1) on 19 June 2023.
The Guidance Note on Short Selling Reporting and Stock Lending Record Keeping Requirements has been updated to cover inter-counter transactions of securities under the Dual Counter Model (Note 2). Corresponding revisions have also been made to the SFC’s Frequently Asked Questions for Short Position Reporting.
The Guidance Note clarifies that as HKD and RMB counters for the same security are of the same class, the following inter-counter transactions fall within the current framework:
(1) when an investor buys a security at one counter first and sells at another, the sale is considered an ordinary sale, and
(2) when a Dual Counter Model market maker sells a security at one counter and buys it at another, the inter-counter transaction falls under the current exemption, subject to certain conditions (Note 3).
“The SFC supports dual counter trading, which will help promote the renminbi’s internationalisation and use as an investment currency,” said Ms Julia Leung, the SFC’s Chief Executive Officer. “An effective and efficient mechanism provided for market makers will help promote liquidity and minimise price differences between the two counters.”
More information about the Dual Counter Model can be found on the website of Hong Kong Exchanges and Clearing Limited.
Notes:
- The Dual Counter Model supports trading of securities in both Hong Kong dollar (HKD) and renminbi (RMB) that are of the same class and issued by the same issuer, including their trading under two separate counters and transfer of shares between the two counters.
- The revised Guidance Note provides examples of HKD-RMB inter-counter transactions to be conducted under the framework of the Securities and Futures Ordinance (Cap 571) and the Securities and Futures (Short Selling and Securities Borrowing and Lending (Miscellaneous)) Rules.
- The relevant exemption is section 3(1)(c) of the Securities and Futures (Short Selling and Securities Borrowing and Lending (Miscellaneous)) Rules.
