HONG KONG is a very good example of what needs to be done!!!
Attachment A: Measures to Strengthen the Order and Transparency of Securities and Futures Markets
Hong Kong Stock Exchange
Short selling
1. SEHK in conjunction with SFC will step up inspection and follow-up actions on unsettled sales trades outside T+2. Heavy penalties including termination of membership for repeated offenders will be imposed on brokers in breach of SEHK rules. SFC will also take prosecution against clients and brokers conducting illegal short selling.
2. SEHK and the SFC will take joint actions to require all broker members and registered dealers to make submissions on short selling trades performed in the past two weeks.
Joe this is a mid point of what we were discussing. short selling period!
3. SEHK has set up a task force to amend its rules to increase disciplinary actions on breaches of its short sales rules and default brokers, including penalty charges, temporary suspension of trading and even termination of membership.
4. SEHK have also reminded its members to discharge their responsibility seriously, including ascertaining that their clients do have the covering stocks for sales order and in the case of short sales do have appropriate arrangements in hand, report them to the Exchange and strictly adhere to the relevant Exchange Rules on short selling. They have also been reminded of possible heavy penalties in case of violation of the rules.
OH YEAH Have the COVER in HAND prior to SHORT SELLING.
5. SEHK has reinstated the "uptick" rule to reduce the selling pressure of short selling on market prices. The rule has been approved by the SFC and come into effect today (7 September).
6. SEHK will review the current list of Designated Securities eligible for short selling to ensure that only stocks with sufficient liquidity will be accepted for short selling.
WHOA, I could live with everyone of these regulations so far!!!!
Other areas
7. SEHK will remind its members to ascertain the identity of their beneficiary clients and disclose the information to the SFC upon request.
YES !!!! YES!!! YES!!! The rightful owners should be disclosed
8. SEHK will review the rules on covered warrants, such as requiring physical settlement and prohibiting issuers from re-issuing the warrants bought back from the market.
YES!!! This addresses the “Floating Short” scenario, no free rides
Hong Kong Clearing
1. HKSCC will immediately revise its settlement rules for the strict enforcement of the T+2. Its Board of Directors will discuss the details of implementation within this week, including compulsory buy-in on T+3 for outstanding positions.
YES No prisoners
2. And to impose effective penalties on default brokers, including buy-in price penalty charges, default fees and suspension of trades for repeated offenders.
3. HKSCC will also consider compulsory stock lending and borrowing arrangements for outstanding positions after close of market on T+2 to fulfil the settlement obligations vis-a-vis the buyers, and then to close the position through buy-in on T+3.
Hong Kong Futures Exchange
1. HKFE rules on capping trade limits in relation to brokers' capital be strictly enforced and the rules limiting the "buffer" to no more than 20% of the capital be strictly observed, with a view to avoiding brokers maintaining a trading position inconsistent with its capital level.
2. HKFE discloses real-time information of holders of large open interests to SFC on a daily basis.
3. At the same time, HKFE also discloses large open interests at a broker level to the market.
4. The threshold for super margin be reduced to open interests of 5,000 contracts or below.
5. HKFE must specify the timetable for advanced migration of HSF trading from open outcry to Automatic Trading System in order to minimise confusion on order execution and possibilities of improper conduct at the trading floor.
6. HKFE in conjunction with the SFC must establish as soon as possible a cross-market early warning system which will provide warning signals to the market and its participants whenever the futures market activity exceeds a predetermined level of the cash market. A response system will also be put in place to trigger appropriate actions such as increasing margin in order to regulate market activities and facilitate market adjustment back to its prudent level.
Securities and Futures Commission
1. Strengthen enforcement and prosecution against illegal short selling.
2. Co-ordinate and supervise the progress and implementation of the above measures, and provide support as may be necessary.
3. Study criminalising unreported short selling.
4. Increase the penalties on illegal short selling. The preliminary proposal by SFC is to increase the maximum penalty of $10,000 and 6-month imprisonment to $100,000 and 2-year imprisonment, so as to enhance its deterrent effect.
Oh YEAH!!!!
5. Prepare legislative proposal to make false reporting to SFC and exchanges a criminal offence.
6. Examine the means to achieve the objective that all investors must open account with CCASS.
7. Examine the feasibility of scripless market to solve the problems arising from physical custody and settlement.
Financial Services Bureau
1. Closely monitor the implementation of the above measures.
2. Co-ordinate on the study on regulation over stock lending and borrowing SLB including regulation over custodians and other stock lenders, so as to enhance transparency on SLB and protection for interests of beneficiary owners of stocks.
ABSOLUTELY!!!!
3. Co-ordinate on the study on regulation over share registrars.
4. Submit the following legislation to the LegCo a.s.a.p.
- criminalisation of unreported short selling ABSOLUTELY!!!
- increase in penalties on illegal short selling ABSOLUTELY!!!
- criminalisation of false reporting to SFC and exchanges. ABSOLUTELY!!!
5. Study the need to amend current legislation to enable the government to react to market situations promptly. Although existing rules already empowers the Chief Executive to give direction to the SFC, legal advice suggests that such power does not apply to exchanges and clearing houses and that it is subject to certain limitations. Therefore, it might be necessary to strengthen the power of the Chief Executive to give direction to the exchanges and clearing houses to ensure that the government can react quickly whenever public interests are under threat.
ABSOLUTELY!!!
6. Co-ordinate a cross-market supervision committee to exchange market information among HKMA, SFC, SEHK, HKFE and HKSCC on a regular basis, and to take prompt and appropriate actions in response to anticipated market manipulation.
ABSOLUTELY!!!
Makes you wonder why the USA has not done this.
P2bAAAT & DSAS |
