Hongkong Clearing plans to introduce stock lending and borrowing services in 1999 to enhance short-selling activity and avoid settlement failure.
Hongkong Clearing said the service was needed as retail investors and small brokers often experienced difficulty selling stocks short as they had no channels to borrow stocks to cover their short positions as required by regulations.
As of the end of November, shares worth $452 billion were deposited in the Central Clearing and Settlement System (CCASS), representing 56 per cent of the total issued share capital of admitted stocks.
Under Hongkong Clearing's proposed plan, all brokers and investors who have accounts at the CCASS would be able to lend their stocks to the clearing house.
The clearing house would then arrange for those stocks to be lent to brokers.
Investors would not borrow stocks directly from the system but through brokers' accounts.
Borrowing will be restricted to the 241 stocks eligible for short-selling.
