Exchange awaits SFC approval to revoke short-selling ban

PUBLISHED : Saturday, 04 August, 2007, 12:00am
UPDATED : Saturday, 04 August, 2007, 12:00am

Hong Kong Exchanges and Clearing plans to remove the restriction on short selling during a falling market that it imposed during the Asian financial crisis.

The change, which will come into effect on November 5, still needs Securities and Futures Commission approval, which an SFC spokesperson says is forthcoming, along with guidelines setting out the conditions upon which the rule would be reinstated.

The tick rule, which bans traders from selling shares short below the best current asking price, was imposed at the peak of the Asian financial crisis in 1998, when the government was battling to keep the market from crashing under the pressure of hedge funds betting it down.

SFC chief executive Martin Wheatley said earlier this year that he supported the removal of the tick rule 'as the market has grown much larger than 10 years ago' and the rule had made Hong Kong fall behind other markets.

Short selling makes up about 5 per cent of total market turnover, far below the 25 per cent to 30 per cent in New York and London.

Christopher Cheung Wah-fung, chairman of the Hong Kong Securities Professionals Association, worried that revoking the rule might lead to a jump in short selling, creating a potential for steeper downturns.