HKEX mulls platform to cut settlement time for IPO investors
- HKEX is seeking to lower the IPO settlement time to ‘T+1’, bringing Hong Kong in line with overseas markets
- Reform would face opposition from industry groups brokers that benefit from the current five-day settlement period
Hong Kong Exchanges and Clearing is seeking to revamp the settlement process for initial public offerings, introducing new efficiencies that will help bring the city’s stock market in line with its counterparts in the US and Europe, according to chief executive Charles Li Xiaojia.
Although the planning is still at an early stage, Li said the exchange is considering an electronic platform and methods to reduce the funds needed during the offer process.
Any changes to the offer process are likely to be controversial, however, as it would likely impact the income of banks, brokers and other parties involved in the IPO process.
Many investors who subscribe to Hong Kong IPOs prefer to file paper applications with an accompanying cheque, even though online services are available. The process can be labour intensive, requiring staff to handle physical forms, cheques, oversee refunds and distribute share certificates.
The manual processing is one reason the typical IPO takes five days to settle in Hong Kong, a system known as “T+5”, as shares in the city can only start trading five days after the share subscription period ends.
Many markets in the UK, US and continental Europe enable trading within one day of the close of subscription, a process known as “T+1”.