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Legal Update

Consultation on Trading Halts for Price Sensitive Information Announcements

17 August 2012
Mayer Brown JSM Legal Update

Quick Read

Hong Kong Exchanges and Clearing Limited (HKEx) published its "Consultation Paper on Trading Halts" (Consultation Paper) on 27 July 2012 to seek views from the public for implementing a trading halt regime that would allow publication of price sensitive information (PSI) announcements during trading hours subject to a short trading halt in the shares of the listed company.

In the Consultation Paper:

  • A trading halt refers to a temporary interruption in the trading of shares of a listed company in reaction to a matter or development which constitutes a piece of PSI, pending the release of the relevant announcement.
  • PSI generally includes notifiable transactions, fund raisings, general offers, results announcements 1 and other disclosures of material information.
    Comments in response to the Consultation Paper should be submitted by 8 October 2012.

Current Arrangement

The securities market of The Stock Exchange of Hong Kong Limited (SEHK) has two continuous trading sessions: (a) 9:30 am to 12:00 noon; and (b) 1:00 pm to 4:00 pm. There is also a 30-minute pre-opening session conducted before the morning session.

Currently, listed companies cannot publish PSI during trading hours. Generally, they are required to publish their announcements during one of the following three publication windows:

  • 6:00 am to 8:30 am;
  • 12:00 noon to 12:30 pm; or
  • 4:15 pm to 11:00 pm (6:00 pm to 8:00 pm on a public holiday before the next business day).

If a disclosure obligation is triggered and a listed company fails to publish PSI on the HKExnews website, trading in its shares will be suspended until publication of the announcement during the next publication window. Trading then resumes in the following trading session. The aim is to ensure that the PSI is disseminated in a fair and equitable manner so that it is made available to all investors at the same time.

Proposals

The purpose for implementing a trading halt regime is to allow PSI to be adequately disseminated during trading hours and assessed by the market in a timely manner, and to reduce any interruption to the trading of shares of listed companies.

The major proposals contained in the Consultation Paper are summarised as follows:

Trading halt - Subject to a short trading halt, a PSI announcement can be released on the HKExnews website during the trading hours of SEHK.

Minimum period - The minimum period for a trading halt is 30 minutes. Accordingly, share trading is to resume at least 30 minutes after the PSI announcement is published on the HKExnews website so that investors have time to digest the announcement. Also, trading halts are lifted at regular intervals, with trading resumption taking place on the quarter hour or the half hour.

Maximum period - The maximum period for which a trading halt may be granted is two trading days. The trading halt lapses and becomes a trading "suspension" automatically if the listed company fails to publish the PSI announcement by the end of the following trading day after the trading halt is imposed.

Post-trading-halt trading - After the lifting of a trading halt, at least 30 minutes of trading (including a 10-minute auction session and 20 minutes of continuous trading) should be given.

Outstanding orders handling - All outstanding orders of the shares entered into before a trading halt or a suspension are to be cancelled automatically by SEHK at the time of the halt.

Single price auction - A 10-minute single price auction for the relevant shares upon the lifting of a trading halt is to be implemented for the purpose of facilitating price discovery.

Results announcements - Results announcements are to be published during the current publication windows as far as is possible. SEHK may grant a trading halt for the publication of results announcement if the listed company is able to give justifiable reasons.

Non-PSI announcements - The existing arrangement of publishing non-PSI announcements outside trading hours is to remain unchanged.

Stock options/futures orders - The existing market practices of handling SEHK's stock options/futures orders is to remain unchanged (i.e. all outstanding orders will be purged automatically by the system at the time of the trading halt of the underlying stocks).

You may download copies of the Consultation Paper via the link below:

http://www.hkex.com.hk/eng/newsconsul/mktconsul/Documents/cp201207.pdf

For inquiries related to this Legal Update, please contact Jeckle Chiu or your usual contacts with our firm. 

Endnotes:

1. However, as proposed in the Consultation Paper, results announcements should be published during the current publication windows as far as possible. Generally, SEHK may grant a trading halt for the publication of results announcement only if the listed company is able to give justifiable reasons.

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