Investment banks will be banned from issuing warrants or other derivatives if their ratings fall below a certain threshold, Hong Kong Exchanges and Clearing said yesterday.
However, warrants already issued by such banks would be allowed to continue to trade but the issuers would need to continue to provide liquidity until the products expired, HKEx said.
Ratings agencies have expressed concern about the impact of the crisis in the euro zone on some banks.
HKEx requires an issuer to have one of the top three credit ratings from either Moody's Investors Service or Standard & Poor's.
At present, no issuers have dropped below this HKEx threshold, although some have been on the brink. HKEx's comments yesterday were made to clarify procedures if an issuer's credit-rating downgrade meant it was banned.
Brokers said the clarification would help ease investors' fears and prevent panic selling of warrants or derivative products issued by these issuers if a downgrade caused their removal as qualified issuers. Moody's last week cut the ratings of French banks Societe Generale and Credit Agricole by one notch, citing their exposure to Greek debt, although their ratings still fall within the HKEx criteria. The rating agency is also reviewing French bank BNP Paribas' rating.