HKEX Consulation Paper: Trading Halts
Release Date: 2012-10-08
The feedback on the consultation paper regarding the short trading halt reflects a reluctant and conditional stance.
During the initial consultation phase, the exchange engaged with our association to discuss the proposal's content and feasibility. At that time, our association advocated for maintaining the current system. The existing short trading halt rules effectively manage the dissemination of price-sensitive information by requiring announcements within three designated periods, allowing trading to resume in the subsequent session. This approach ensures that every investor has at least 30 minutes to absorb the information. The straightforward nature of these rules minimizes disputes and provides ample time for non-professional investors to comprehend the reasons behind the halts. Furthermore, there have been no significant complaints or controversies regarding short trading halts in recent years. The proposed reform seeks to enable companies to resume trading after just 30 minutes, which unnecessarily complicates the process, generates market confusion, and deprives amateur investors of adequate time to process the information. Despite these concerns, the exchange is determined to pursue consultation for reform, which raises questions.
Recently, a senior exchange official explained that the primary goal of this reform is to counteract dark pool trading. If trading on the exchange is halted for too long while dark pools remain active, the exchange's competitiveness could suffer, potentially driving investors towards dark pools and ultimately harming the interests of the exchange, investors, and brokers in the long term. In light of this explanation, our association can only reluctantly accept the situation.
Attached are our responses to the consultation questions for your consideration.
Hong Kong Securities and Futures Professionals Association.
Q1: Do you agree that the Hong Kong market should not adopt a model without a halt in trading after the release of PSI during trading hours (i.e. the UK model as described in paragraph 48)? Please give reasons for your views.
Agree.
Reason: Ensure that sufficient time is allocated for the thorough digestion and analysis of the sensitive information involved.
Q2: Do you agree with our proposal to allow publication of PSI announcements on the HKExnews website during trading hours subject to a short trading halt? Please give reasons for your views.
Agree.
Reason: It is essential to display pertinent information on a clearly designated bulletin board to facilitate easy verification.
Q3: Do you agree that the maximum period for which a trading halt may be granted is two trading days and the trading halt will be treated as suspension thereafter if the issuer fails to publish the PSI announcements by end of the following trading day after the trading halt is imposed? Please give reasons for your views.
Agree.
Reason: The distinction between a temporary suspension and a "suspension" within the mandatory issuance domain.
Q4: Do you agree that results announcements should be published during the existing publication windows as far as possible? Please give reasons for your views.
Agree.
Reason: The performance announcement is foreseeable and can be arranged ahead of time.
Q5: Do you agree that the existing arrangement for non-PSI announcements to be published outside trading hours should remain unchanged? Please give reasons for your views.
Agree.
Reason: At present, the arrangements are functioning effectively.
Q6: Do you agree that the trading halt should not apply to dually listed issuers under the circumstances as described in paragraph 57 above? Please give reasons for your views.
Agree.
Reason: Due to the potential emergence of inequitable trading conditions and circumstances.
Q7: What is the minimum period for a trading halt after the publication of PSI announcement, 30 minutes, 45 minutes or 60 minutes? Please specify and give reasons.
30 minutes
Reason: No opinion
Q8: Do you agree that trading halts should be lifted at regular intervals on the quarter hour or the half hour? Please specify and give reasons.
15 minutes
Reason: We believe the information involved is not too complicated.
Q9: Do you agree that at least 30 minutes of trading should be provided after lifting of a trading halt? Please give reasons for your views.
Agree.
Reason: Its necessary.
Q10: Do you agree with the proposed notification arrangements for the trading halt and resumption information? Please give reasons for your views.
Agree.
Reason: It is essential to create a distinct and dedicated information bulletin page for the aforementioned arrangements.
Q11: Do you agree that all existing orders of the securities entered before a trading halt or a suspension be purged by the Exchange at time of halt? Please give reasons for your views.
Agree.
Reason: Prevent disputes
Q12: Do you agree that all existing orders of the Exchange’s stock options / futures market practices should remain unchanged (i.e. all outstanding orders will be purged automatically by the system at the time of trading halt of the underlying stocks)? Please give reasons for your views.
Agree.
Reason: Standardize guidelines to eliminate ambiguity.
Q13: Do you agree with the implementation of a single price auction upon lifting of a trading halt? Please give reasons for your views.
Disagree.
Reason: Firmly reject the necessity for a bidding process; streamline the resumption of trading documents to the greatest extent possible, as ensuring regular trading operations is adequate.
Q14: Do you agree with the implementation of a single price auction also applies for trading resumption at the commencement of afternoon trading session upon lifting of a trading halt following the release of a PSI announcement during the lunch publication window? Please give reasons for your views.
Disagree.
Reason: Same as answering to Q13.
Q15: Do you agree that if an issuer has not requested for any trading halt or suspension of its securities and is able to maintain the confidentiality of the PSI announcement before releasing it during the lunch publication window, in these circumstances the single price auction will apply to the issuer’s securities? Please give reasons for your views.
Disagree.
Reason: Same as answering to Q13.
Q16: Do you agree that a single price auction will only apply to securities traded in the securities market upon lifting of a trading halt of the underlying? Please give reasons for your views.
Disagree.
Reason: Same as answering to Q13.
Q17: Do you agree with the proposed duration of the mid-session auction (i.e. 10 minutes)? Please give reasons for your views.
Disagree.
Reason: Same as answering to Q13.
Q18: How much lead time would be required after the relevant system specifications were available to prepare for the implementation of trading halt, three months or six months? Please specify if you have alterative views.
Six Months.
Reason: More time adjustment.