On 6 June 2023, the Hong Kong Securities and Futures Commission (SFC) updated the Guidance Note on Short Selling Reporting and Stock Lending Record Keeping Requirements (Guidance Note) and the Frequently Asked Questions for Short Position Reporting (FAQs). The updates are made in response to the launch of the HKD-RMB Dual Counter Model in the Hong Kong securities market on 19 June 2023.
Upon the launch of the HKD-RMB Dual Counter Model by Hong Kong Exchanges and Clearing Limited, an RMB trading counter was introduced to securities of certain companies listed in Hong Kong, to allow Hong Kong investors to trade those securities in RMB, in addition to HKD. Despite the difference in trading currency, shares of the same security in the two trading counters are generally of the same class, with the same holders’ rights and entitlements, and fully interchangeable between counters.
To reflect the feature of this HKD-RMB Dual Counter Model in the context of short selling reporting, the SFC updated the Guidance Note to clarify the reporting requirements for inter-counter transactions, as follows:
(i) when an investor buys a security at one counter first and sells at another, the sale is considered an ordinary sale, and
(ii) when a market maker sells a security at one counter and buys it at another, the inter-counter transaction falls under the current exemption, subject to certain conditions.
The FAQs have also been updated to reflect that both the HKD and RMB counters of a security traded under the HKD-RMB Dual Counter Model are on the list of designated securities in respect of which reporting of reportable short positions is required. When determining whether there is a reportable net short position of a designated security with HKD-RMB dual trading counters, a person should (1) calculate the net short position of each counter by netting off the long positions of the other counter of the same designated security; (2) identify the counter which attributes to the aggregated short position; and (3) report the net position value of that counter separately.
For further information, please contact:
Pinky Siu, Partner, Deacons
pinky.siu@deacons.com
