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The Government has announced that the Securities and Futures (Offences and Penalties) (Amendment) Regulation 2012 (the Amendment Regulation) takes effect today (June 18). The Securities and Futures (Short Position Reporting) Rules made by the Securities and Futures Commission (SFC) will come into operation at the same time.
The Rules stipulate a new short position reporting regime, under which those who hold short positions in specific shares are required to report to the SFC. The Amendment Regulation sets out the offences and penalties under the new regime. The Rules are made by the SFC under section 397 (1) and (2) of the Securities and Futures Ordinance, while the Amendment Regulation was made by the Chief Executive in Council pursuant to section 398(6) of the Ordinance.
A Government spokesman said, "When comparing with various overseas markets, Hong Kong's regulatory regime for short selling activities has always been very robust. For example, naked short selling is generally prohibited, and short selling activities are subject to the 'uptick rule', i.e. short selling cannot take place at a price lower than the best ask price at that time. These measures can effectively reduce the risks that short selling activities may bring to the market."
He added, "The new reporting regime will assist the SFC in collecting more market information, with a view to strengthening its ability in monitoring short selling activities in the market. This is conducive to maintaining Hong Kong's financial stability. The SFC has consulted the public on this matter. In general, the setting up of a reporting regime for short positions has received wide support from the market."
Separately, the Hong Kong Exchanges and Clearing Limited has reviewed earlier on the eligibility criteria for designating securities for short selling, and decided to amend the relevant eligibility criteria to reflect the developments of the securities markets in Hong Kong. The eligibility criterion related to the market capitalisation and turnover velocity (i.e. the ratio of aggregate turnover during the preceding 12 months to market capitalisation) will be increased from $1 billion to $3 billion and from 40 per cent to 50 per cent respectively. The revised short selling eligibility criteria have been approved by the SFC and will come into effect on July 3, 2012.
Ends/Monday, June 18, 2012
Issued at HKT 16:00
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