HKEx to consult market on tick rule
Hong Kong Exchanges and Clearing will consult the market this quarter on technical details about how to relax the short-selling tick rule, according to chief executive Paul Chow Man-yiu.
The Securities and Futures Commission last month approved a stock exchange proposal to relax the short-selling tick rule, but with a condition. Mr Chow said the SFC proposed relaxing the tick rule under normal market conditions. However, if the Hang Seng Index fell 5 per cent in a single day, it would restore the tick rule for the next five days.
If the index fell another 5 per cent during any of those five days, the tick rule would remain for another five days, Mr Chow said after a listing ceremony yesterday.
The tick rule bars traders from short-selling below the best current asking price, a restriction that discourages short-selling and effectively bans it during a falling market. The restriction was introduced in August 1998 during the Asian financial crisis to fight off hedge fund speculators.
SFC chairman Martin Wheatley first called for a relaxation of the rule at the beginning of last year to allow more short-selling in the city, and the stock exchange in November said it wanted to relax the rule. But the market slump delayed the plan.
HKEx also will issue another consultation paper this quarter to study how to improve the closing auction system, including whether it should allow short-selling during the auction period.
