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SFC reaches conclusion on expanding short position reporting, effective March 2017

On 24 February 2016, the Securities and Futures Commission (SFC) published conclusions to its consultation released in late November 2015 to expand the scope of short position reporting under the Securities and Futures (Short Position Reporting) Rules (SPR Rules).

After considering market feedback which was generally supportive of the proposals, the SFC has concluded to adopt them, and will proceed to submit the corresponding amendments to the SPR Rules to the Legislative Council for negative vetting.

The proposed changes to the existing short position reporting regime include:

  • the scope of short position reporting will be expanded to all securities that are determined by The Stock Exchange of Hong Kong Limited (SEHK) to be “Designated Securities” (i.e. listed securities that can be short sold under the rules of SEHK);
  • for collective investment schemes, the reporting threshold trigger will be set only at the $30 million threshold;
  • for the purposes of determining the value of a net short position and whether applicable under the SPR Rules, if the closing price of a Designated Security is in a foreign currency, it must be converted into Hong Kong dollars at a specified rate of exchange for that foreign currency;
  • in a contingency situation, daily reporting will apply to those Designated Securities determined by the SFC which the SFC will list out on a public notice; and
  • the SFC may designate more than one electronic system for short position reporting.

To give the market reasonable lead time for preparation, the SFC plans for the amended rules to come into effect on 15 March 2017, subject to the legislative process.

The SFC will make further announcements regarding operational reporting arrangements for the expanded regime and provide additional FAQs in due course.

The consultation conclusions paper is available here.

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