Jurisdiction - Hong Kong
Reports and Analysis
Hong Kong – Short Position Reporting.

15 March, 2012


Legal News & Analysis – Asia Pacific – Hong Kong Investment Funds 


The Hong Kong Securities and Futures Commission (the “Commission”) recently published proposed rules on short position reporting. This followed a lengthy public consultation process. 
The proposed rules are expected to come into effect on June 18, 2012.
As evident from the summary below, there are still a number of areas needing clarification, not least of which are the details of the reporting system itself. The Commission has indicated that it will issue further guidance on the operation of the rules and a notification once the system for reporting is ready for testing. 
Who will need to report? Generally, the person who beneficially “owns” a reportable position will be required to make the filing, although, in the case of a trust, the trustee will be required to report. In the case of a partnership, one partner may make the report on behalf of the others. Parties will be able to appoint agents to report on their behalf, but should note that they will remain ultimately responsible. The rules are proposed to apply across the board; there are no exemptions for categories of participants such as market-makers. 
What positions will need to be reported? The rules apply to short positions: 
  • „ In shares listed or traded on the Hong Kong Stock Exchange that are constituents of the Hang Seng Index or of the Hang Seng China Enterprises Index or that are separately designated. The Commission is expected to publish a list of specified shares on its website. 
  • „ Resulting from a short sale or sales executed through the Hong Kong Stock Exchange or specified automated trading services (there are no ATS specified currently). The reporting requirements do not extend to trades executed outside these venues or economic short positions established through derivatives. 
  • „ Determined on a net basis. For purposes of netting off, the rules define a long position as that obtained by beneficial ownership of the shares in question. The Commission has stated that it will permit reporting of net positions at a 
  • trading book or unit/trading strategy level, although it has not yet published guidelines on how this will apply in practice. Corporate umbrella funds will be required to report net short positions at a sub-fund level. Positions attributable to different partnerships are to be treated separately and not aggregated. 
  • „ Where the value of the net short position is or exceeds the threshold amount. This is the lower of 0.02% of the closing price of the relevant shares multiplied by the total number of specified shares in issue, or HK$30,000,000. Values are 
  • to be calculated based on the closing price of the shares on the day in respect of which the report is filed (or the last closing price if trading is suspended).
  • „ Determined weekly, as of the close of trading on the Hong Kong Stock Exchange on the last trading day each week. Note, however, that the Commission retains the power to require daily reporting if it believes that circumstances warrant this. 
When will positions need to be reported? Reports will be due within two business days (in Hong Kong), so would normally need to be filed by the Tuesday following a Friday trading day. Market participants should note the possibility that the Commission may, on 24 hours’ notice, require positions to be reported on a daily basis. 
How will positions need to be reported? Positions will need to be reported electronically through an online system to be established by the Commission. The Commission is still to provide many of the details. 
Will positions be published? The Commission will publish data on a delayed basis. It must take reasonable steps to mask individual positions and identities. 
What are the penalties for non-compliance? Failure to comply with the requirement without reasonable excuse will be an offense under the Hong Kong Securities and Futures Ordinance. 
The Commission has encouraged market participants to sign up for e-mail alerts on short position reporting via its portal. 
For further information, please contact:


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