The paper is understood to be a response to proposals contained in the Government's Financial Market Review released in April.

The report said: 'The failure of Peregrine and financial problems of other listed companies have demonstrated the need for more financial disclosure by listed companies.' While disclosure standards are better in Hong Kong than in many of its regional competitors, the recent spate of corporate difficulties has undermined international confidence in the market.

It is understood that in addition to increasing the public float and demanding quarterly disclosure, the paper suggests introducing guidelines to ensure firms disclose crucial financial information in a more timely manner.

This would include firms revealing exposure to a single group or person and any significant exposure to countries or markets that were experiencing financial upheaval, the source said.

The exchange is also considering asking listed firms to disclose conditions on certain loan agreements that are outside the control of a listed company.

The paper might also include whether to require firms to disclose a profit and loss account, balance sheet and cash-flow information in interim reports, the source said.

Former Hong Kong Stockbrokers' Association chairman Cheung Tin-sang said he supported the move to increase market transparency.

'It is important for small shareholders to get more information on listed companies before making investment decisions,' he said.

Legislator Eric Li Ka-cheung from the accounting industry, said that with the majority of locally listed companies family owned, 'directors need to increase disclosure of financial information to make investors believe the companies are managed in a professional way'.