Hong Kong’s Securities Futures Commission (SFC) has set out new rules on short position reporting, following a consultation that ended in November. The proposed rules are due to come into effect on 18 June, once the Chinese Special Administrative Region's Legislative Council has considered them.
Based feedback from a May 2011 public consultation, the latest proposal introduces reporting of short positions on a net basis. It also aims to provide greater clarity on reporting obligations in relation to corporate umbrella funds and jointly-owned short positions. The SFC announced in October it would introduce short selling reporting rules in the first quarter of this year but did not release further details.
Under the current draft rules, net short positions of 0.02% or more of the issued share capital of a listed company, or a market value of HK$30 million (whichever is lower), are to be reported to the SFC. Reports must be submitted electronically within two business days and the SFC will then publish aggregated short positions of each stock, on an anonymous basis, within three business days.
“The rules published today 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, CEO of the SFC. “With this regime in place, 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.”
During the 2008 global financial crisis, the Hong Kong regulator had resisted tightening short selling rules.