Frequently Asked Questions 
31/12/2012 
 

Chapter 5

Market Operations and Trading


5.5

Trading Halt or Suspension, Resumption and Delisting 

 

5.5.1

Will trading in the securities of a Hong Kong listed issuer be halted or suspended during the trading session due to their price volatility?

To maintain a fair and orderly market, the Exchange usually contacts a listed issuer if it notices unusual movements in the price or trading volume of its securities, or press reports or market rumours which may affect the price or trading volume of its securities. In those circumstances, the issuer must promptly respond to any such enquiries from the Exchange.

Listed companies must fulfill their continuing obligations under the Listing Rules to provide timely disclosure of information necessary to avoid a false market in their securities or any inside information which needs to be disclosed under Part XIVA of the Securities and Futures Ordinance and ensure the fair distribution of the information. Where the listed issuer is unaware of any matter or development that is or may be relevant to the unusual price movement or trading volume of its listed securities, it should clarify the situation by publishing an announcement on the HKEXnews website as soon as possible. However, a trading halt or suspension is not necessary if the announcement can be made promptly.

Where necessary (e.g. if it is found or suspected that the unusual movement is caused by a leak of any inside information that needs to be disclosed under Part XIVA of the Securities and Futures Ordinance), the listed issuer must publish a statement duly approved by the board specifying the circumstances which it knows to have potentially led to the unusual movement in its price or trading volume.  Where the listed issuer delays in issuing an announcement to disclose information necessary to avoid a false market in its securities or any inside information that needs to be disclosed under Part XIVA of the Securities and Futures Ordinance, trading in the issuer’s securities may be halted or suspended until the announcement is released.

Unusual movements in share price or trading volume refer to unusual movements in a company’s share price and/or trading volume that have no obvious reason, e.g. a significant rise in the issuer’s share price when the market is plunging, or a significant increase in trading volume. When determining whether or not any movement in price or trading volume is “unusual”, the Exchange will take into account the historical performance of the stock or the performance of other stocks in the same sector and overall market conditions.

For the securities market, a Volatility Control Mechanism (VCM) is also applied on all Hang Seng Index and Hang Seng China Enterprise Index constituent stocks as well as only applicable to board lot order input during certain periods of the Continuous Trading Session.  A five minute cooling-off period is triggered if the price of an applicable security deviates more than ±10% away from the last traded price five minutes ago.  During the cooling-off period, trading is not halted but still allowed within a pre-defined price band.  Normal trading without restriction will resume after cooling-off period. 

 

5.5.2

When can trading resume after a trading halt or suspension?   

It has been the policy of the Exchange to refrain from trading halt or suspension unless necessary. Trading halt or suspension is just a tool to address potential and actual market disorder. Even if a trading halt or suspension is necessary, the duration of halt or suspension should be kept as short as is reasonably possible.

Where dealings have been halted or suspended, the procedure for lifting the trading halt or suspension will depend on the circumstances and the Exchange reserves the right to impose such conditions as it considers appropriate.  Under normal circumstances, the Exchange will restore dealings as soon as possible following publication of an appropriate announcement, or when the specific reasons given by the listed issuer in support of its request for a trading halt or suspension no longer apply.  In some cases the trading halt or suspension will be continued until any specific requirements have been met.

 

5.5.3

Can trading in a listed issuer’s securities resume in the trading session immediately after the issuer’s announcement of information necessary to avoid a false market in its securities or inside information or a notifiable transaction under the Listing Rules?

Where trading in the listed securities has been halted or suspended pending an announcement of information necessary to avoid a false market or inside information or a notifiable transaction as referred to in the Listing Rules, resumption in trading of the listed issuer’s securities may take place during the commencement of the next trading session after the publication of the announcement. The announcement published by the listed issuer must contain adequate information so that trading can resume in a fair manner with the market fully informed.

 

5.5.4

Will the Exchange make announcements or comment about the status of issuers when their securities have been halted or suspended from trading at their own request?

It is the responsibility of listed companies to make announcements to ensure that investors and the public are given sufficient information for making properly informed assessment of the listed companies’ securities.

To enhance market transparency, the Exchange will require companies to issue a short explanation when they request a trading halt or suspension.  The Exchange will maintain contact with listed companies when their securities have been halted or suspended from trading, and require them to make an announcement before trading in their securities resumes.  Investors are advised to frequently check the Latest Listed Company Information on the HKEXnews website for the listed companies’ announcements. 

It is the Exchange's general policy not to comment on individual companies, individuals, or cases.  This policy enables the Exchange to discharge its regulatory function on a confidential basis and to preserve the integrity of its process, as well as to protect listed issuers and their directors against whom unfounded accusations may have been made. The “no comment” policy exists primarily for these reasons, and to ensure that the Exchange meets its statutory obligation to maintain confidentiality with respect to regulatory information in its possession.

In certain exceptional circumstances, however, it may be appropriate for the Exchange to comment, or to give information, about specific matters. The key reasons why the Exchange may adopt this approach are to maintain public confidence in the regulation of the market or to discharge its obligation, pursuant to Section 21 of the Securities and Futures Ordinance, to maintain, as far as reasonably practicable, an orderly, informed and fair market for the trading of securities and under the Listing Rules to preserve the general integrity and reputation of the market; to protect investors; to prevent widespread malpractice; or, help any investigation process.

 

5.5.5

Will the Exchange take the initiative to direct a trading halt or suspension in a listed company’s securities or delist a listed company?  

The Exchange operates a continuous trading market. In spite of its consistent policy to allow continuous trading in a listed issuer’s securities as far as possible, the Exchange may, for the sake of maintaining a fair and orderly market, direct a trading halt or suspension in a listed company’s securities or delist a company in such circumstances and subject to such conditions as it thinks fit.  The Exchange may also do so where:

1. the issuer (the listed company) fails, in a manner considered material, to comply with the Listing Rules;
2. there are insufficient securities in the hands of the public;
3. the issuer does not have a sufficient level of operations or assets to warrant the continued listing of its securities;
4.

the issuer or its business is no longer suitable for listing.

For Main Board listed companies, the continuation of a trading suspension for a prolonged period without the issuer taking adequate action to obtain restoration of listing may lead to the Exchange cancelling the listing. The Exchange will delist a Main Board listed company whose securities have been suspended from trading for a prolonged period for the reason set out in (iii) above in accordance with the procedures set out in Practice Note 17 of the Main Board Listing Rules. For a listed issuer whose securities have been suspended from trading for six months or more and which has failed to comply with relevant Main Board Listing Rules, the Exchange will determine whether it is appropriate to proceed to the second stage of the Delisting Procedures.  Where a listed issuer is placed to the second stage of the Delisting Procedures, it is given six months to submit a viable resumption proposal to the Exchange. The listed issuer will be placed to the third stage of the Delisting Procedures should it fail to submit a viable resumption proposal within the prescribed timeframe. Upon entering the third stage of the Delisting Procedures, the listed issuer will be given a final six months to submit a valid resumption proposal. Where no viable proposal has been received from the issuer for resumption of trading by the end of the third stage, its listing will be cancelled.

The Exchange may also delist a Main Board company in accordance with Main Board Listing Rule 6.10. Where the Exchange considers that a Main Board issuer or its business is no longer suitable for listing it will publish an announcement naming the issuer and specifying the period within which the issuer must have remedied those matters which have rendered it unsuitable for listing. Where appropriate the Exchange will suspend dealings in the securities of the issuer. If the issuer fails to remedy those matters within the period set out in the announcement, the Exchange will cancel the listing. Any proposals to remedy those matters will be treated as if they were an application for listing from a new applicant.

Where the securities of a GEM issuer have been continuously suspended for a prolonged period without the issuer taking adequate action to obtain a restoration of the listing, the Exchange may cancel their listing. Where the Exchange proposes to exercise its right to cancel a listing, it will usually give the GEM issuer a period (ordinarily, six months) to remedy those matters that have given rise to the Exchange’s proposal to cancel the listing. On the expiry of the specified period, the Exchange may give notice to cancel the listing with immediate effect or, where the issuer has responded with proposals satisfactory to the Exchange, may exercise its discretion to extend the period within which the issuer is expected to have remedied those matters that have given rise to the Exchange’s proposal to cancel the listing.

Issuers, either on the Main Board or GEM, whose assets consist wholly or substantially of cash or short-dated securities will not normally be regarded as suitable for listing (except where the issuer is an “investment company” as referred to in Chapter 21 of the Main Board Listing Rules or is solely or mainly engaged in the securities brokerage business) and trading of their securities will be suspended by the Exchange.  The issuer may apply to the Exchange to lift the suspension once it has a business suitable for listing. The Exchange will treat its application for lifting of the suspension as if it were an application for listing from a new applicant. The Exchange reserves the right to cancel the listing if such suspension continues for more than 12 months or in any other case where it considers it necessary.

 

5.5.6

What should investors do with securities that trading in the securities has been halted or suspended or the company has been delisted from the Exchange? 

When trading in securities has been halted or suspended, investors holding the securities should keep track of the listed companies’ latest announcements published on the HKEXnews website.  Investors can also refer to the Monthly Prolonged Suspension Status Reports in the Issuer-related Information section on the HKEXnews website for Main Board and GEM listed securities that have been suspended from trading for three months or more.

Once delisted, the listed issuer’s securities are no longer eligible for trading on the Exchange. The delisted company is no longer a listed issuer. In these circumstances, the company is no longer subject to the Listing Rules, and the rights of individual securities holders are only governed by the laws of the issuer’s place of incorporation and relevant articles of association. If investors hold securities of companies which are still registered in Hong Kong, they should contact the company directly about their entitlements or other procedures and information.