Trading Halt Conclusions from the Hong Kong Stock Exchange s Consultation

Transcription

1 March 2013 Trading Halt Conclusions from the Hong Kong Stock Exchange s Consultation The Stock Exchange of Hong Kong Limited (the Exchange) published the conclusions to its Consultation on Trading Halts on 15 March 2013 (the Conclusions). The Exchange has also published a set of frequently asked questions relating to the changes. A majority of respondents supported the proposal to allow a listed issuer to release an inside information announcement (II announcement) during trading hours, subject to a trading halt of no less than 30-minutes following the announcement. As a result, the Exchange plans to implement the proposed changes by introducing the new arrangements no earlier than mid The Exchange has indicated that detailed operational procedures and changes to the Listing Rules with respect to trading halts will be published in due course. Contents Current regulations... 1 Trading halt and inside information announcements... 1 Resumption of trading after halt... 2 Trading halt and trading suspension... 2 Practical implications... 3 Implementation plans... 5 This alert summarises the changes which are most relevant to listed issuers, including A and H share issuers, and issuers with a secondary listing in Hong Kong. Current regulations Under current regulations, issuers are required to publish announcements within three stipulated publication windows 1 and are not permitted to publish inside information during trading hours. If a disclosure obligation is triggered and an issuer fails to publish the relevant inside information, trading in its securities is suspended until its publication. Trading then resumes in the first trading session following publication. Trading halt and inside information announcements When the new changes become effective, the Exchange will permit issuers to publish II announcements during trading hours, subject to a trading halt. The trading halt must be no less than 30 minutes and no longer than two trading days. 1 The three windows are (i) 6:00 am to 8:30 am; (ii) noon to 12:30 pm and; (iii) 4:15 pm to 11:00 pm (6:00 pm to 8:00 pm on a public holiday before the next business day). Trading Halt Conclusions from Hong Kong Stock Exchange s Consultation 1

2 Resumption of trading after halt Trading resumes after a minimum period of 30 minutes following the publication of the II announcement. This is consistent with the current arrangements where investors are given at least 30 minutes to digest information (from the close of a publication window to the commencement of the next trading session) and make an informed investment decision. In addition, there must be at least 30 minutes of trading (including a 10 minutes auction session and 20 minutes continuous trading) after the lifting of a trading halt (Minimum Trading Period). Trading will resume on the closest quarter hour after the trading halt is lifted. Trading halt and trading suspension The Exchange has indicated that when an issuer applies for a trading halt, it should make a written request stating the reasons why a trading halt is necessary and it should have any associated II announcement ready for publication as soon as practicable. The idea is that the II announcement should be published as soon as possible (ideally at the same time the trading halt commences) but no later than the following trading day after the halt is imposed. A listed company that is subject to halt status can publish its II announcement during a trading session, and trading of its shares can resume in that session after the minimum information digestion period of 30 minutes, provided that there is at least 30 minutes of trading left in that session. Whereas, a company that is subject to suspension status can not release its II announcement during trading hours and can only publish it outside of trading hours during the three stipulated publication windows. Trading then resumes at the commencement of the first trading session following publication. The trading halt will lapse at the end of two trading days if the associated II announcement has not yet been published and the trading status of an issuer will change from halt to suspension automatically. Trading Halt Conclusions from Hong Kong Stock Exchange s Consultation 2

3 Practical implications When is the latest time an issuer can release an II announcement on a normal trading day if it wishes to lift the halt and resume trading during the same trading session when the announcement is made? The combined effect of the trading halt and the Minimum Trading Period means the latest time to publish an II announcement in such a case is: in the morning, assuming the morning trading session ends at noon. Trading resumes at 11.30; and in the afternoon, assuming the afternoon trading session ends at Trading resumes at Will the new changes apply to results announcements? Issuers will not normally be permitted to publish results announcements during trading hours. Since the publication of results is planned and scheduled, a trading halt or suspension should not be necessary. The Exchange has said it may grant a trading halt for the publication of results announcements if sufficiently justified by the issuer. Can an issuer publish a non-ii announcement during trading hours? The Exchange will maintain the current arrangement which requires an issuer to publish non-ii announcements outside of trading hours. However, the Exchange has said it will keep under review the practice of allowing inside information to be published during trading hours, before considering whether to apply halts to other types of announcements. What happens if an issuer does not publish the II announcement within the two trading days requirement? The trading halt will lapse at the end of two trading days and the trading status of the issuer will change from halt to suspension automatically. Once trading in an issuer s securities is suspended, it can no longer publish II announcements during trading hours and the rules that apply to suspension will apply. Will an issuer need to indicate in its announcement of a trading halt when it intends to publish the inside information? The Exchange said it is unlikely that the issuer will be required to indicate in its trading halt announcement when it intends to publish the inside information. Trading Halt Conclusions from Hong Kong Stock Exchange s Consultation 3

4 How will A and H share issuers be affected? At present, similar to Hong Kong requirements, A share issuers must publish material information outside of trading hours in the Mainland market. The proposed trading halt regime in Hong Kong is not aligned with the current requirements in the A share market and therefore, unless the Mainland stock exchanges amend their current regulations, A and H share issuers may not be able to benefit from the proposed trading halt arrangements. The Exchange said it is in dialogue with the Mainland stock exchanges and will continue to work with them to coordinate information disclosure requirements for A and H share issuers, and related trading suspension and resumption arrangements in all markets to the extent practicable. Dual listed issuers and issuers with secondary listings in Hong Kong The same trading halt rules will apply to all listed issuers, unless an issuer receives a waiver from the Exchange. An advantage of the proposed changes is that for dual listed companies and issuers with secondary listings in Hong Kong whose shares are listed on the Exchange and other overseas exchanges and where the trading hours overlap with each other, subject to the rules of the overseas exchanges, it may be possible to publish inside information in all affected markets simultaneously. In the Conclusions, the Exchange indicated that dual listed issuers with a primary listing on the London Stock Exchange which have obtained waivers of the normal Hong Kong rules to allow the publication of II announcements during Hong Kong trading hours will be able to publish such announcements during trading hours without a trading halt in Hong Kong. However, the proposed changes will continue to give rise to certain complications. The Exchange has concluded that scheduled results announcements will fall outside the trading halt regime, which means if they are made during Hong Kong trading hours (for example because of time differences between London and Hong Kong), such dual listed issuers will still need to apply for a suspension in Hong Kong for the trading session in question. The Exchange has indicated that it will consider granting a trading halt for the publication of results announcements if sufficiently justified by the issuer. Trading Halt Conclusions from Hong Kong Stock Exchange s Consultation 4

5 Implementation plans The Exchange recognises that the implementation of the trading halt proposals will involve major changes to trading arrangements and operations of Exchange Participants. Implementation of the proposals will coincide with the rollout of other major market infrastructure initiatives proposed by the Exchange and as a result the anticipated timeline would be no earlier than mid The Exchange has said that it will coordinate with relevant market participants to educate investors about the proposed changes before implementation. The Exchange has also said that it will facilitate access to trading halt information (such as time of trading halt and its lifting) by providing the information on a separate information page through different HKEx channels, including the HKExnews website. This publication is intended merely to highlight issues and not to be comprehensive, nor to provide legal advice. Should you have any questions on issues reported here or on other areas of law, please contact one of your regular contacts, or contact the editors. Linklaters Business Services (H.K.) Limited. All Rights reserved 2013 Linklaters Hong Kong is a law firm affiliated with Linklaters LLP, a limited liability partnership registered in England and Wales with registered number OC It is a law firm authorised and regulated by the Solicitors Regulation Authority. The term partner in relation to Linklaters LLP is used to refer to a member of the LLP or an employee or consultant of Linklaters LLP or any of its affiliated firms or entities with equivalent standing and qualifications. A list of the names of the members of Linklaters LLP and of the non-members who are designated as partners and their professional qualifications is open to inspection at its registered office, One Silk Street, London EC2Y 8HQ, England or on Please refer to for important information on our regulatory position. We currently hold your contact details, which we use to send you newsletters such as this and for other marketing and business communications. We use your contact details for our own internal purposes only. This information is available to our offices worldwide and to those of our associated firms. If any of your details are incorrect or have recently changed, or if you no longer wish to receive this newsletter or other marketing communications, please let us know by ing us at marketing.database@linklaters.com. Trading Halt Conclusions from Hong Kong Stock Exchange s Consultation 5