Wednesday October 12 2016

News Source: Global Exchanges

Focus: Trading Rules

Type: General




On September 30, Shenzhen Stock Exchange (SZSE) formally released eight sets of rules governing the upcoming Shenzhen-Hong Kong Stock Connect program, including:

  • Measures for the Implementation of Shenzhen-Hong Kong Stock Connect Program;
  • Guidelines on the Management of Investor Suitability for Hong Kong Connect;
  • Mandatory Provisions for the Risk Disclosure Statement for Hong Kong Connect Trading;
  • Mandatory Provisions for the Client Agreement for Hong Kong Connect;
  • Circular on Information Disclosure by Listed Companies and Relevant Issues under Shenzhen-Hong Kong Stock Connect,
  • Guidelines on the Implementation of HKSCC Participation in Online Voting;
  • revised Detailed Implementation Rules on Online Voting at Shareholders’ General Meetings; and
  • SZSE Trading Rules.

Among others, as the eligible shares for Hong Kong Connect include part of the constituents of the Hang Seng Composite Small Cap Index, which generally are small in size with unstable performance and volatile stock prices, the Mandatory Provisions for the Risk Disclosure Statement for Hong Kong Connect Trading place special emphasis on the following risks:

  • Firstly, in consideration of the expansion of the scope of eligible shares, requesting investors to note the risk that there may be significant fluctuations in the fundamentals and share prices of some small- and mid- cap companies;
  • Secondly, given the existing differences in both rules and systems between Hong Kong and Shenzhen stock markets, noting the a lack of delisting risk alerts and pre-delisting arrangements in the Hong Kong market, there exists the risk that shares may be suspended from trading for long periods or delisted directly and that nominee services are likely to be restricted for delisted shares;
  • Thirdly, summarising the characteristics of the so-called “cheating shares” (refinancing instruments like deeply discounted rights issues and share consolidations).

In addition, in order to further regulate information disclosure by listed companies and relevant persons with disclosure obligations under Shenzhen-Hong Kong Stock Connect and to fully protect domestic investors’ legitimate rights and interests, the Exchange further specifies the arrangements for regulation of information disclosure.

From August 26 to September 9, SZSE had solicited public opinions and comments from market and the relevant trading and clearing participants on the Measures for the Implementation of Shenzhen-Hong Kong Stock Connect Program. The SZSE received 91 responses from brokerage houses, the Securities and Futures Commission of Hong Kong (SFC), the Stock Exchange of Hong Kong Limited (SEHK), law firms and individuals. SZSE has adopted 41 responses after careful study and made improvements to the relevant rules.

Among others, the responses adopted by SZSE mainly concentrate on increasing risk disclosure in respect of the areas of particular concern, clarifying specific operations based on actual business operation and refining phrasing of rule clauses.

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