Market Needs Greater Clarity on Central Clearing
March 15, 2010, Finance Asia

Following a 2009 survey, Hong Kong's stock market regulator, the Securities and Futures Commission, made changes to the rules governing monitoring of short selling in constituent stocks of the Hang Seng Index and certain other stocks.

The SFC introduced a new rule requiring it to be notified on a weekly basis 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. The identity of the firm owning the short position will not be revealed.

"Note that this legislation deals with reporting of positions but not the method or manner of short-selling securities as Hong Kong already has a robust short-selling regime which the SFC appears to feel comfortable with," said Sharon Hartline, a partner at law firm White & Case in Hong Kong.

"This is more of an attempt to enhance the system to ensure that the SFC has access to information when a crisis does occur or may be brewing. Some of the biggest concerns with the proposed increased reporting obligations for short sales were firstly the cost of complying with the same versus the benefit of such information to the regulator and its ability to appropriately utilise the massive amounts of information that could be generated by an overly broad reporting regime and secondly the confidentiality of short positions."