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Hong Kong Exchanges and Clearing Ltd is the holding company for the city’s stock exchange, futures exchange and clearing company. Its market capitalisation made it the world’s biggest listed bourse as of the end of 2012. In December 2012, the HKEx clinched the US$2.2 billion takeover of the London Metal Exchange, the world's biggest marketplace for industrial metals.


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HKEx mulls consultation on shareholding structures

PUBLISHED : Wednesday, 30 October, 2013, 3:31am
UPDATED : Wednesday, 30 October, 2013, 2:08pm

Hong Kong's stock exchange is edging closer to a consultation that could lead to a revision of its listing rules, following mainland e-commerce giant Alibaba's abandonment of an initial public offering.

"Following on from discussions at the April and July listing committee policy meetings, listing committee members discussed a possible market consultation on different shareholding structures at today's meeting as part of its regular agenda on policy matters," Hong Kong Exchanges and Clearing said yesterday. "Progress was made in developing a course of action which may lead to a public consultation exercise."

Alibaba failed to convince Hong Kong regulators to waive rules and allow the unique partnership structure it wanted, which would have given 28 partners - mainly founders and senior executives, who own about 10 per cent of the company - the power to nominate a majority of its board members.

The Securities and Futures Commission said giving partners that much voting power would cut across the one-share, one-vote principle that underpins Hong Kong' securities law.

Alibaba founder Jack Ma Yun said last week that if Hong Kong decided to discuss changes to its listing rules because of his company, he would be honoured.

"Hong Kong doesn't need Alibaba, but the city needs innovation for its future," Ma said.

HKEx chief executive Charles Li Xiaojia said last week that consideration should be given to non-standard shareholding structures for "innovative companies". Ma said he had read Li's article and thought it an "active and positive" message.

On Monday, Financial Secretary John Tsang Chun-wah said a consultation to gauge public opinion should be conducted if changes to the listing rules were being considered.

Francis Lun Sheung-nim, the managing director of Lyncean Securities, said Ma and Li appeared to be "shadow dancing" after reaching a tacit understanding. "The government and HKEx want to do the business, but the problem is they have to convince the SFC," he said.

Alibaba, which runs the Taobao Marketplace online shopping platform, had planned to launch an initial share sale that could have valued the company at more than US$100 billion.

Xie Wen, an information technology expert and former president of Yahoo China, which is part of Alibaba, said he doubted that Hong Kong's listing rules would be changed.

"Charles Li has said Hong Kong won't change its rules for one company," Xie said. "He used to be a lawyer and he knows what he is talking about.

"I don't see any room left for the possibility of changing Hong Kong's listing rules."


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This article is now closed to comments

Unlike the United States, China is not a country known for her innovative ability. Instead she is known for her piracy power. Almost everything is pirated. Even a faked iem is faked. (It is rumoured that a certain Chinese guy bought a pile of phony banknotes in the street, for obvious reason, only to find later that all the notes underneath the first one are all white in both sides).
This is too bad. Perhaps it is rightly claimed that song piracy has killed the song industry worldwide. I’ll be highly disappointed if patent protection is not high in the reform list in the upcoming Third Plenary Session of the 18th CPC Central Committee held in Beijinng. If the final fruits of invention or innovation can’t be ensured, only a fool will invent or innovate. Similarly, if the subsequent control of the business can’t be ensured, only an idiot will start up an innovative company.
I think Professor Stephen N.S. Cheung, a world-class patent expert (right now in China), should be widely consulted on this topic.
Hong Kong’s listing rules should be modified, not for Alibaba, but for the future innovative startups in China. Who knows? Maybe some guy some day will come up with a new kill-all-cancer wonder drug. Shouldn’t we help him or her to develop the drug to benefit us and our next generation? If Americans can, why can’t we?
While ordinary companies manufacture products or provide services to meet customers’ demand, high–tech innovative companies create customers’ demand by manufacturing innovative products or providing innovative services (Apple’s i-products come to mind). That’s why they are different , and that’s why they should be treated differently.
(I am not part of the Alibaba Group).


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