A Securities and Futures Commission consultation on short-selling and stock-borrowing rules is likely to lead to the stringent regulations being relaxed, according to analysts. The consultation on the rules, introduced after Government stock market intervention in 1998, was announced yesterday by SFC chairman Andrew Sheng. 'We need to review both the strengths and weaknesses of the rules,' Mr Sheng said. He said they should be in line with global regulations. The move follows remarks by Financial Secretary Antony Leung Kam-chung in a newspaper report on Monday that the Government could relax some of the 1998 rules. The short-selling regulation made it illegal for investors not to report the practice. It also required investors to enter borrowing agreements before short selling. The Government also requested the stock exchange to strictly reinforce its 'up-tick' rule for short selling, which prohibited speculators from exacerbating market falls by short selling below the current best price. The rules have been facing strong opposition from most international brokerages, as well as stock custodians. They could be partly relaxed for some institutional players. For example, the watchdog could allow those players to sell shares before entering into borrowing arrangements for hedging their derivatives positions. Hong Kong Exchanges and Clearing might relax the rule allowing more flexibility to hedge. Some analysts speculated the market's persistently low turnover might be a major reason behind the consultation. Hong Kong's daily turnover has shrunk from a peak of about HK$20 billion to about HK$6 billion. Meanwhile, two other stringent measures introduced in 1998 concerning Hang Seng Index (HSI) futures and options were also likely to be removed soon, according to media reports. Brokers are subject to a disclosure requirement for any single holding of 250 or more HSI products' open interests, as well as an upper limit of 10,000 contracts. However, Mr Sheng said yesterday he had not received a plea for any relaxation.