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Hong Kong – Consultation On Trading Halts.

 

15 October, 2012

 

In July 2012, the Exchange published a consultation paper on proposed trading halts that would allow its listed companies to publish announcements with price sensitive information during trading hours.

 
Under the proposal, a listed company will be able to release a PSI announcement on the HKExnews website during trading hours, provided that there is a short halt in trading of the company’s shares to enable investors to digest the contents of the announcement. At present, companies are not allowed to publish PSI announcements during trading hours. If a disclosure obligation is triggered during trading hours now, trading in the company’s shares must be suspended immediately and will only resume in the next trading session following publication of an announcement.In addition to bringing Hong Kong in line with international market practices, trading halts would significantly reduce the duration of periods when shares cannot be traded. Trading halts would also result in more accurate intraday securities price discovery, as price discovery would occur as soon as possible after release of all material information relevant to a security’s value. Trading halts may also help investors holding products such as structured products, stock options and stock futures close out their positions to avoid bearing risk overnight.
 
A summary of the key proposals is as follows:
 
1.  A listed issuer’s PSI announcements will be allowed to be released on the HKExnews website during the Exchange’s trading hours and subject to a short trading halt, for the purposes of digestion of contents of announcements by the public.
2.  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. Any trading resumption will take place on the quarter hour or the half hour.
3.  To provide at least 30 minutes of trading (including 10 minutes auction session and 20 minutes of continuous trading) after lifting of trading halts.
4.  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.
5.  To facilitate price discovery, a single price auction will take place in the securities market for the relevant stocks and structured products upon lifting of a trading halt. The auction session will last for 10 minutes.
6.  Results announcements will be published during the current publication windows as far as possible. The Exchange may grant a trading halt for the publication of results announcement if a halt is justified by the issuer.
7.  The current practice of releasing non-PSI announcements outside trading hours will remain unchanged.
8.  The maximum period for which a trading halt may be granted by the Exchange is two trading days. If the issuer fails to publish the PSI announcement within the proposed maximum period, the trading halt will lapse and its status will be changed to “suspension” automatically.
9.  The current Exchange stock options/futures order handling practices will remain unchanged (i.e., all outstanding orders will be purged automatically by the system at the time of trading halt of the underlying stocks).
 
For a copy of the consultation paper, please follow the link: 
 

 

For further information, please contact:
 
Tony Grundy, Partner, Morrison Foerster
 
John Moore, Partner,  Morrison Foerster

 

 

 

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