Hong Kong Exchanges and Clearing Limited published the Consultation Paper – Trading Halts on July 2012. The consultation has been finalized on March 2013. The purpose of the consultation paper is to seek market views on a proposed model for implementing a trading halt that would allow publication of price sensitive information (“PSI”) announcements during trading hours subject to a short trading halt in shares of the listed companies. The proposed model allows PSI to be adequately disseminated and assessed by the market. It also allows a period for public evaluation of the information.
Summary of the key proposals
- To allow a listed company’s PSI announcements to be release on the HKExnews website during the Stock Exchange of Hong Kong Ltd. (the “Exchange”)’s trading hours and subject to a short trading halt.
- The proposed duration of 30 minutes trading halt applies to all PSI announcements to be released during trading hours. Share trading will resume at least 30 minutes after the PSI announcement is published on the HKExnews website.
- To provide at least 30 minutes of trading after lifting of trading halts.
- All existing orders of the securities in the securities market entered before a trading halt or a suspension are to be cancelled automatically by the Exchange at the time of halt.
- A single price auction will take place in the securities market for the relevant stocks and structured products upon lifting of a trading halt.
- Results announcements will be published during the current publication windows as far as possible.
- The current practices of releasing non-PSI announcements outside trading hours will remain unchanged.
- The maximum period for which a trading halt may be granted by the Exchange is two trading days.
- The current Exchange’s stock options / futures order handling practices will remain unchanged.
Merits of the proposals
- Enhancing market competitiveness: An overseas company listed in Hong Kong and on other exchange, where the trading hours overlap with our own, may be required by the rules of overseas exchange to disclose PSI immediately, even during trading hours. The implementation of trading halts would avoid the disadvantages to Hong Kong investors in terms of information access and trading opportunity, enhancing our market competitiveness.
- Enhancing overnight risk management and prices discovery: The proposal may facilitate investors in derivatives products to close out the opening position instead of bearing risk overnight. Besides, the proposals would provide more accurate intraday prices in securities since price discovery would occur as soon as possible after all material information relevant to a security’s value has been released.
- Alignment with international market practices: All leading overseas markets reviewed allow publication of PSI throughout the day. The proposals will bring Hong Kong in line with international market practices.
The trading of securities will resume after a short trading halt after the publication of PSI announcements, listed companies may be more inclined to conclude the transactions or sign agreements that lead to the publication of PSI announcements during trading hours. Consequently, the number of trading halts that would be imposed in the average trading day may increase accordingly. However, trading halt allows PSI to be adequately disseminated during trading hours and assessed by the market in a timely manner. It will significantly reduce the duration of suspension.
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