Published On: Thu, May 10th, 2012

Eligibility Criteria Tightened for Designated Securities for Short Selling

The Stock Exchange of Hong Kong Limited, a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx), is implementing changes to the short selling criteria for designated securities available for short selling to reflect development in the securities market following a review conducted earlier this year.

As a result of the review, the eligibility criterion related to the market capitalisation and turnover velocity1 will be increased from $1 billion to $3 billion and from 40 per cent to 50 per cent respectively. The change reflects the fact that the average market capitalisation of listed companies in Hong Kong has grown by around three times and the market turnover velocity has increased from around 40 per cent to over 50 per cent in the past decade.

Had the new short selling eligibility criteria been adopted in the last quarterly review in April this year, 82 out of the existing 646 designated securities would have become ineligible for short selling.

The new Regulation for short selling eligibility criteria has been approved by the Securities and Futures Commission and will take effect on 3 July 2012 (Tuesday). Investors and Exchange Participants may refer to Regulation 18 of the Eleventh Schedule of the Rules of the Exchange available on the HKEx website for the details.

1 Defined as the ratio of aggregate turnover during the preceding 12 months to market capitalisation.

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