News from other other side of the globe …

Not to long after the SEC announced its new regulations on short sales, we have learned that the Securities and Futures Commission of Hong Kong (the “SFC”) that it will be introducing a short-position reporting regime to enhance transparency of short selling activities in Hong Kong.   There is little doubt that this stems from industry feedback and the SFC’s view of the current domestic market situation.

The SFC’s CEO, Mr. Martin Wheatley, claims that the “build-up of large short positions may be potentially disruptive to market stability” and that this “short-position reporting regime will not only complement Hong Kong’s robust short-selling regulatory framework but will also provide a more complete picture of short-selling activities in our market.”

Under the proposed regime, the reporting obligation will be triggered if a short position is equal to or exceeds, 0.02% of the issued share capital of a listed company, or a market value of $30 million, whichever is lower. Weekly reports must be submitted to the SFC until the short position falls below both trigger levels. The SFC will publish aggregated short positions of each stock on an anonymous basis a week later.

Managers should particulary note that only the constituent stocks of the Hang Seng Index, the H-shares Index, financial stocks and other stocks specified by the SFC will come under this new reporting regime.  Derivatives will not be included.