Hong Kong Exchanges and Clearing chief executive Charles Li Xiaojia will be grilled by lawmakers tomorrow over his controversial decision to suspend seven heavyweight stocks after the bourse's website was hacked into earlier this month.
The trading disruption caused by the suspension of the stocks with a combined market capitalisation of HK$1.5 trillion upset some brokers and investors. But if Li had not acted, would there have been complaints that adequate precautions were not taken?
The former investment banker chose to halt the stocks, believing it was the lesser of two evils.
The security breach came on August 10 in the form of so-called distributed denial-of-service attacks, which prevent access to a website by overwhelming its capacity to handle traffic. As a result, the HKEx regulatory disclosure website - which gives investors access to company announcements - could not be accessed.
The HKEx learnt about the problem at noon but the website did not resume normal service until 8pm. Since seven companies - including HSBC, Cathay Pacific Airways and HKEx itself - were making transaction announcements in the lunch break, the bourse decided to suspend those shares and debt securities as well as 419 derivatives linked to the stocks. Trading resumed a day after, when a back-up website was set up.
Some investors were angry at the suspension, particularly day and warrant traders who take short-term bets, buying stocks or warrants and selling them a few hours later.
But there may be sound reasons for the move. Unlike overseas markets such as Britain or the United States, which are mainly traded by institutional investors such as hedge funds and insurers, Hong Kong has traditionally been the territory of retail investors.
Imagine Mrs Chan had visited the HKEx disclosure website during the August 10 lunch break and could not read the important announcements being made by the seven blue chips. She would think no news is good news, and go on playing mahjong with her friends.
If the stocks had not been suspended and other fund managers, insurers or more sophisticated investors read the news from the company websites - which most retail investors do not usually do - then they would be at an advantage to Mrs Chan.
If the shares had fallen significantly on Wednesday afternoon while Mrs Chan was enjoying her mahjong, she would have complained vociferously to lawmakers and the HKEx.
It may not have been the perfect solution, but based on the situation in Hong Kong, where shares are traded by millions of retail investors - many of whom rely on the HKEx site - it was a way to ensure fairness.
In the past, the HKEx distributed these corporate announcements through newspaper advertisements and e-mails, which would be helpful if the disclosure website crashes again. It should also educate investors to get them used to the idea of companies making announcements at any time.
Hong Kong and Shanghai are the two major markets that do not allow firms to release price-sensitive information during trading hours. Many overseas markets require companies to halt trading after releasing information.
As an international market it is a must that Hong Kong catches up. And don't underestimate the learning power of retail investors like Mrs Chan - all we need is more time for them to learn new tricks.