The Securities and Futures Commission (SFC) wanted to set the trading threshold for share consolidation at HK$1 - double the 50-cent level that caused panic selling on Friday - it emerged yesterday.
Hong Kong Exchanges and Clearing released a detailed timetable of its discussions with the SFC in an attempt to deflect blame over its role in the penny stocks debacle.
HKEx, heavily criticised for setting the threshold too high, originally proposed only that stocks trading at or below one HK cent for more than 20 days in a quarter would have to consolidate their shares.
However, the SFC insisted the consolidation threshold be set at HK$1 while the minimum initial public offering price be set at HK$5. After nearly a year of negotiation, the SFC compromised on the 50 HK cents threshold.
'The exchange considered [a HK$1] threshold would affect too many companies so it has bargained with the SFC in the past year,' HKEx chief executive Kwong Ki-chi told a special Legislative Council panel meeting on the penny stocks chaos yesterday.
SFC chairman Andrew Sheng defended the commission's stand, saying HK$1 was not a de-listing threshold but the level below which companies would have to merge their shares so as to raise their prices. The regulator's objective had been to prevent the market being flooded with low-priced stocks, he said.
'At low unit prices - I emphasise that these are just unit prices - stocks tend to have higher volatility and are more easily manipulated on very thin trading,' Mr Sheng said.