Hong Kong Concludes Short Position Reporting Rules

Mary Swire, LawAndTax-News.com, Hong Kong

15 February 2012

Hong Kong’s Securities and Futures Commission (SFC) has published the conclusions to its consultation on proposed short position reporting rules, which will now be submitted to the Legislative Council for consideration.

Under the proposed rules, net short positions, as at the close of the last trading day of each week, that amount to or exceed the threshold of 0.02% of the issued share capital of a listed company, or a market value of HKD30m (USD3.9m), whichever is lower, are to be reported to the SFC.

Reports must be submitted electronically within the following two business days. In general, the duty to report is imposed on the party who has the reportable short position. The reporting requirement may be changed to daily reporting in certain situations.

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 SFC will publish aggregated short positions of each stock, on an anonymous basis, within three business days after the receipt of the reports.

“The published rules have been shaped by extensive consultation with relevant stakeholders to lay down a clear regulatory framework for market participants to report short positions to the SFC,” said Ashley Alder, the SFC’s Chief Executive Officer.

“With this regime in place,” he added, “the SFC will be able to perform its role more effectively in monitoring the market, including detection of significant build-up of short positions. We believe our publication of data on aggregated short positions will enhance transparency to the market.”

On behalf of the SFC, Alder further urged market participants to start preparing for the new reporting requirement. Subject to the legislative process, the rules will come into effect on June 18, 2012.

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