HONG KONG: Exchange Publishes Guidance Letter on Trading Halts in Securities of Listed Issuers

Friday December 11 2015

The Stock Exchange of Hong Kong Limited (the Exchange), a wholly owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx), has issued a guidance letter on trading halts in securities of listed issuers. The letter sets out the criteria for and principles of trading halts under the current rules and provides guidance on good practices about trading halts pending disclosures of material information by listed issuers. It also facilitates investors` understanding of the circumstances where trading halts are necessary.

Issuers should also refer to the “Guidelines on Disclosure of Inside Information” published by the Securities and Futures Commission (SFC) for guidance on their Inside Information (as defined in the Securities and Futures Ordinance (SFO)) disclosure obligations under the SFO.

Criteria and Principles of Trading Halts
The Exchange is the front line regulator of listed issuers. It has a statutory obligation under the SFO to ensure, so far as reasonably practicable, an orderly, informed and fair market in the trading of securities.

For this purpose or the protection of investors the Exchange may suspend trading in any securities. Trading halts are tools to address both potential and actual false, unfair or disorderly market. Trading halts serve to protect investors by allowing trading on a fully informed basis. By creating a break in trading they aim to avert the risk of a false, unfair or disorderly market or where such conditions are already emerging.

At the same time, to ensure the proper functioning of the market, any trading halt should be kept to a period that is absolutely necessary to ensure investors are not denied reasonable access to the market.

Under Main Board Rule 13.10A and GEM Rule 17.11A, an issuer must, as soon as reasonably practicable, apply for a trading halt (where an announcement cannot be made promptly) in the following circumstances:

• it has information which must be disclosed to avoid, in the opinion of the Exchange, a false market; or
• it reasonably believes that there is Inside Information which must be disclosed under the Inside Information Provisions; or
• circumstances exist where it reasonably believes or it is reasonably likely that confidentiality may have been lost in respect of certain Inside Information.

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