Hong Kong in consultation on changes to stock listing regime

Hong Kong’s Securities and Futures Commission is seen as having a potentially bigger say in the process by which companies are listed on the Stock Exchange of Hong Kong, under a set of proposed “enhancements” to regulations issued jointly late on Friday by the SFC and Hong Kong Exchanges and Clearing Ltd.

A statement posted on the website of the Hong Kong Exchanges and Clearing (HKEX) said the proposed changes would “streamline the processes for making important or difficult listing decisions, and enable the SFC and the Exchange to better coordinate and address future regulatory needs, while maintaining Hong Kong’s competitiveness as an international financial centre”.

In its report on the proposed changes, the South China Morning Post noted that the introduction of proposed changes to the listing rules “aimed at improving listing quality” came in the wake of “a series of high-profile cases of badly handled new listings”.

It cited as an example the case of a company called Growth Enterprise Market, the shares of which it said had been the target of speculative trading shortly after listing.

The proposed changes would also see HKEX chief executive Charles Li cease to be a member of the committee that approves new listings, a fact contained in the notes at the bottom of the consultation statement.

According to the SCMP, this is being proposed because some market participants had seen the fact of an HKEX official sitting on the committee which approves new listings to be a possible conflict of interest for the exchange, even though there are, at present, 28 members on the listing committee.

Under the current listing regime, the HKEX is responsible for making new listing rules and rule amendments, subject to the prior approval of the SFC. The proposals would create “two new ‘Exchange Committees’ on which the SFC and the [HKEX] are equally represented”. Another committee, the Listing Committee, would provide “a non-binding view” to both of those committees.

Hong Kong Exchanges and Clearing – which is itself a listed company – is one of the largest global stock exchange operators. In addition to owning and running Hong Kong’s stock exchange and futures exchange, it also operates four Hong Kong clearing houses, is a provider of market data, and owns the London Metal Exchange.

The three-month consultation ends on 19 September. The joint consultation paper may be downloaded from the SFC website or the HKEX website.

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