| Q1. |
What is a trading halt?
A trading halt is generally a temporary interruption in the trading of a security or group of securities in anticipation of or in reaction to an unusual event or condition affecting a security or group of securities. It allows inside information (II) to be adequately disseminated and assessed by the market and allows a period for public evaluation of the information.
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| Q2. |
What is the purpose of introducing trading halts?
At present, issuers are not allowed to publish inside information during trading hours. If a disclosure obligation is triggered during trading hours, trading must be suspended immediately and will only be resumed in the trading session following the publication of the announcement. Implementation of trading halts by the Exchange will allow inside information to be adequately disseminated and assessed by the market in a timely manner during trading hours. This will significantly reduce the duration of temporary breaks in trading. See Q3 below for details of benefits arising from the introduction of trading halts.
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| Q3. |
What benefits will trading halts bring to the market?
The implementation of trading halts will benefit issuers, investors and other market participants in several ways and help enhance market competitiveness.
| i. |
Issuers will be allowed to publish inside information during the Exchange's trading hours.
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| ii. |
It will provide a framework for inside information to be adequately disseminated and assessed by the market in a timely manner during the Exchange’s trading hours.
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| iii. |
It is likely to significantly reduce the duration of breaks in trading, as it will be possible for trading of securities to resume subject to a short trading halt after the publication of II announcements, increasing the trading opportunities for investors.
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| iv. |
For shares listed on the Exchange and an overseas exchange where the trading hours overlap with each other, it will be possible to publish inside information in both markets simultaneously. Therefore, it will help avoid disadvantages to Hong Kong investors in terms of information access and trading opportunities, enhancing the Exchange’s competitiveness.
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| v. |
It may facilitate investors in structured products, stock options, stock futures and other products wishing to close out open positions before the end of the trading day instead of bearing risk overnight.
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| vi. |
It is likely to provide more accurate intraday prices in securities since price discovery will be able to occur as soon as possible after all material information relevant to a security's value has been released.
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| vii. |
It will bring Hong Kong in line with practices of other leading markets. |
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Trading Halt Model
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| Q4. |
What is the Exchange's proposed model for trading halts?
The Exchange may grant a trading halt at the request of a listed issuer for publication of an II announcement on the HKExnews website during trading hours. The maximum period for which a trading halt may be granted is two trading days. If the issuer fails to publish the II announcements within the maximum period, the trading halt will lapse and its status will be changed to "suspension" automatically. Thereafter, the issuer has to follow the existing information dissemination arrangement for publication of II announcements during the publication windows2. Trading of its shares will resume in the trading session after publication of the announcement.
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2
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Currently, there are three publication windows for issuers to publish their announcements on the HKExnews website – (i) 6:00 am to 8:30 am; (ii) 12:00 noon to 12:30 pm; (iii) 4:15 pm to 11:00 pm (6:00 pm to 8:00 pm on a public holiday before the next business day).
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| Q5. |
Why is a maximum period of two trading days needed?
The maximum period of two trading days is set with reference to the fact that sufficient lead time should be provided to listed issuers to seek their board members’ approval on the publication of II announcements, particularly for issuers whose board members are overseas or may not be available immediately. In 2011, around 60 per cent of suspensions lasted for two trading days. The Exchange also reviewed overseas market practices. In Australia and Singapore, the maximum period for which a trading halt may be granted is two trading days and three trading days respectively. Issuers requesting trading halts should have their II ready for publication as soon as practical. In any event, it should be published no later than the following trading day after the trading halt is imposed. Please refer to Q4 above for arrangements if an issuer fails to publish the II within the maximum period of two trading days.
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| Q6. |
Why didn't the Exchange choose a model without trading halts for the release of II during trading hours (eg UK model)?
The purpose of the trading halt is to give investors time to evaluate the information. Since Hong Kong's market has a relatively large retail investor base (unlike UK, which is predominantly institutional investors who are equipped to access and digest information quickly), sufficient time should be provided for investors to digest the information. Therefore, a trading halt regime is more suitable, taking into account the local market characteristics. The model proposed by the Exchange was supported by the majority of respondents.
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| Q7. |
Will trading halts apply to all kinds of announcements?
The model will apply only to II announcements which are to be released during trading hours. The existing arrangements for results announcements and non-II announcements to be published outside trading hours will remain unchanged. The Exchange may grant a trading halt for the publication of results announcements if the request is justified by the issuer. The Exchange will study the experience gained with halts for the publication of II during trading hours before considering the regular use of halts for other types of announcements.
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| Q8. |
When will a trading halt be lifted?
Under the model, the resumption of share trading must be at least 30 minutes after the II announcement is published by the issuer on the HKExnews website. Any trading resumption will take place on the quarter hour. The 30-minute trading halt period does not include time for issuers to prepare their announcements so issuers will have to have their II ready for publication before requesting a trading halt. The model requires at least 30 minutes of trading (including a 10-minute auction session and 20 minutes of continuous trading) after the lifting of a trading halt. Therefore, the latest time for trading resumption will be 3:30 pm for a normal trading day.
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| Q9. |
How will outstanding orders entered before a trading halt be handled?
Under the model, all existing orders for the securities (including associated derivative warrants and Callable Bull/Bear Contracts, or CBBCs) entered before a trading halt will be cancelled automatically by the Exchange at the time of the halt. All outstanding orders for related stock options/stock futures will be purged automatically by the system at the time of trading halt of the underlying stocks. This is same as the existing arrangements in HKEx’s stock options and stock futures markets.
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| Q10. |
Does the model have any auction sessions upon lifting of a trading halt?
To facilitate price discovery, a single price auction will take place in the securities market for the relevant stocks and structured products upon lifting of a trading halt. This is in line with overseas market practices. All overseas markets with trading halts resume trading with a single price auction. The single price auction mechanism is same as that of the existing Pre-opening Session which has been operating smoothly to prevent significant price fluctuation and possible manipulation during the market open since 2002. The auction session will last for 10 minutes and comprise an order input period of 7 minutes followed by pre-order matching, order matching and blocking periods of 1 minute each. Trading will commence following the completion of the auction session. The single price auction will also apply if the trading of halted / suspended securities is resumed at the commencement of the afternoon trading session. The single price auction will not apply to the Exchange’s stock options and stock futures. The trading of related stock options and stock futures will only resume upon completion of the single price auction for the underlying stock.
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| Q11. |
Will the single price auction (as mentioned in Q10 above) be applied when an issuer has not requested a trading halt or suspension but releases a II announcement during the lunch publication window (ie 12:00 pm to 12:30 pm)?
Yes. For consistency, a single price auction will also apply to facilitate price discovery for related securities (including derivative warrants and CBBCs) when trading commences at the start of the afternoon trading session following the release of an II announcement during the lunch publication window. Under the planned arrangement, all existing orders will be cancelled automatically by the Exchange prior to the commencement of single price auction session at 1 pm.
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| Q12. |
What are the planned changes to the trading arrangements in the secondary market?
Key proposals related to trading arrangements
Securities market
| (a) |
Timing for lifting of trading halts. Share trading will resume no less than 30 minutes after the II announcement is published on the HKExnews website. Any trading resumption will take place on the quarter hour.
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| (b) |
Minimum time of trading after lifting of a trading halt. There will be at least 30 minutes of trading (including a 10-minute auction session and 20 minutes of continuous trading) after the lifting of a trading halt.
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| (c) |
Mid-session auctions for securities upon lifting of a trading halt. To facilitate price discovery, a 10-minute single price auction will take place in the securities market for the relevant stock and any related structured products upon lifting of a trading halt.
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| (d) |
Order handling. All existing orders in the securities market (including orders for the stock and its related structured products) entered before a trading halt will be cancelled automatically by the Exchange at the time of the halt.
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Derivatives market
| (a) |
Stock options and stock futures order handling practices will remain unchanged. All outstanding orders will be purged automatically by the system at the time of trading halt of the underlying stock.
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| (b) |
The mid-session auction will not apply to HKEx’s stock options and stock futures markets. The trading of related stock options and stock futures will resume upon the completion of the mid-session auction for the underlying stock as described above. |
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| Q13. |
How will investors obtain trading halt information, including the release of any II announcements and the timing of any trading resumptions?
To enable investors to check news releases in relation to trading halts quickly and easily and to reduce the risks that they may overlook the release of II announcements, HKEx will provide the required information (time of trading halt, time of lifting of trading halt, etc.) in a separate information page through different HKEx channels, including the HKExnews website.
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| Q14. |
The addition of “trading halt” and its definition were among the Listing Rules changes consequential on the statutory backing to issuers’ continuing obligation to disclose inside information that have been part of the Rules since 1 January 2013. Is there any difference between the existing “trading halt” and the one referred in the Consultation Paper / Consultation Conclusions on Trading Halts?
As defined in Chapter 1 of Listing Rules, “trading halt” is an interruption of trading in an issuer’s securities requested or directed pending disclosure of information under the Rules and extending for no more than two trading days. Trading halts currently serve as “short” suspensions and the existing Rule requirements for suspension generally apply. For instance, at present issuers are not allowed to publish II during trading hours. If a disclosure obligation is triggered during trading hours, trading must be halted immediately and will only resume in the trading session following the publication of the announcement. The trading halt mentioned in the Consultation Paper / Consultation Conclusions is different because it allows issuers to publish II during trading hours subject to a short trading halt. The Exchange anticipates the term “trading halt” as currently defined in the Listing Rules will remain unchanged. However, there will be other Rule changes affected by the implementation of the trading halt model. For details of the trading halt model, please refer to the Consultation Paper / Consultation Conclusions.
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| Q15. |
Will an issuer be allowed to publish II after the market closes if it requests a trading halt during trading hours? If so, will the issuer be required to indicate in its trading halt announcement when it intends to publish the II?
An issuer will be allowed to publish II after the market closes if it requests a trading halt during trading hours. The Exchange anticipates that the issuer will not be required to indicate in its trading halt announcement when it intends to publish the II. However, as mentioned in Q5 above, issuers requesting trading halts should have their II ready for publication as soon as practical. In any event, it should be published no later than the following trading day after the trading halt is imposed. Detailed operational procedures in respect to trading halts will be published in due course.
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Implications of the Trading Halt Model
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| Q16. |
What kind of impact will trading halts have on the market?
The introduction of trading halts will have implications for issuers, investors, information vendors and other market participants.
Listed Issuers
- Issuers will be required to notify the Exchange before the submission of an II announcement to the Electronic Submission System. They will need to choose an “Inside Information” headline category together with other relevant headline categories for an announcement to be disseminated during trading hours.
- Issuers will need to liaise with the Listing Division and make a written request stating the specific reasons why they are requesting a trading halt.
- For an II announcement related to one or more other issuers, the issuer will have to indicate to the Exchange that the announcement is also relevant to another issuer, which will have its own obligation to separately disclose that information.
- Issuers may be more inclined to conclude transactions or sign agreements that lead to the publication of II announcements during trading hours.
Investors
- Investors will be expected to take a more active role in monitoring the dissemination of announcements during trading hours to ensure they have all information they might need to make an informed investment decision.
- Prior to introduction of trading halts, HKEx will coordinate with relevant market participants to educate investors about the changes to come (including information dissemination for halts and resumptions, mid-session auction arrangements and trading arrangements during typhoons and black rainstorms).
HKEx Participants
- HKEx Participants involved in stocks and stock-related options and futures will have to review their trading and back office systems and related procedures to assess whether changes have to be made.
- For client support, HKEx Participants will need to review and determine whether their procedures for handling outstanding client orders are properly disclosed or reflected in their client agreements.
Information Vendors
- Information vendors will receive additional information arising from the implementation of the mid-session auctions and are likely to see a higher volume of news during trading hours. They may therefore have to change their system processes accordingly.
All Groups Above
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| Q17. |
How will the A+H share suspension and resumption arrangements be affected?
At present, material announcements are required to be published in designated newspapers or posted on a designated website outside trading hours in the Mainland market. The proposed trading halt regime may not allow the alignment of the Exchange’s information dissemination model with that of the Mainland. The Exchange noted that Shanghai Stock Exchange (SSE) recently published a guideline for the website dissemination of information and reduction of pre-vetting announcements. SSE also indicated that it will explore allowing listed companies to publish announcements in the morning, afternoon and evening sessions over the long term, with the ultimate goal of working out a real-time disclosure regime. The Exchange’s trading halt policy will bring it in closer alignment with the SSE’s goal. The Exchange will continue to communicate and coordinate with the Mainland stock exchanges on developments in the respective information disclosure mechanisms. The Exchange will continue to work with the Mainland stock exchanges to coordinate A+H shares information disclosure and trading suspension and resumption arrangements in all markets to the extent practicable.
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| Q18. |
Will there be any change to the existing suspension and disclosure principles after the introduction of trading halts?
There will be no change to the existing suspension and disclosure principles following the introduction of trading halts. A listed issuer will be able to request a trading halt if its II announcement will be ready for publication within two trading days (see Q4 above for details of what will happen if the issuer fails to publish the II within the prescribed period). In any event, the Exchange may suspend the trading of any securities in order to maintain an orderly market and protect the interests of investors.
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Implementation
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| Q19. |
What changes are required of market participants for the implementation of trading halts?
As pointed out in the Consultation Paper, the Exchange is aware that the implementation of trading halts, particularly the mid-session auction, will involve significant changes to Exchange Participants’ systems and operations. For Exchange Participants using Exchange provided AMS terminals and/or MWS (Multiple Workstation Systems) for trading, the Exchange will be responsible for the system changes related to trading halts. At present, about one-third of Exchange Participants solely use Exchange provided AMS terminals and/or MWS for trading. The other two-thirds of Exchange Participants use in-house and/or system vendor provided trading systems. The Exchange will provide technical assistance to Exchange Participants and system vendors to prepare for the related system changes. Based on its preliminary discussions with the major BSS vendors, the Exchange understands that most of them will not charge Exchange Participants if the changes are initiated by the Exchange and are mandatory. However, details of fees and charges are subject to the service contract and commercial arrangement between the Exchange Participant and its system vendor.
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| Q20. |
What is the proposed implementation schedule for trading halts?
In view of the concerns raised by some respondents on the change efforts required, the Exchange considers that implementation of the trading halts should coincide with the rollout of other major market infrastructure initiatives to minimise the development and testing of the market systems. The Exchange will provide sufficient lead time to the market for preparation. As a result, implementation of the trading halt proposals will not be earlier than mid-2014. A possibility under consideration is to introduce trading halts as part of the Exchange’s new Orion Trading Platform infrastructure. The implementation date and schedule will be announced in due course.
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