ENG-2008 — Page 118

74 | Financial and Monetary Affairs

Recent Developments

In May 2008, a Closing Auction Session (CAS) was introduced to the stock market after market and public consultation. The CAS aimed at facilitating trading at market close and determining securities closing prices using the same auction. algorithm applied in the Pre-Opening Session. As part of the HKEx's plan to consult market participants on possible enhancements to the existing closing auction mechanism based on experience with the CAS, the HKEX conducted another public consultation in November inviting comments on the introduction of a price control mechanism during CAS.

In June, the SFC issued a paper on consultation conclusions in relation to a number of proposed amendments to the Codes on Takeovers and Mergers and Share Repurchases (Takeovers Codes) relating to privatisations and withdrawal of listing from the stock exchange, securities borrowing and lending activity by persons. connected to an offer and dealings by connected discretionary fund managers and principal traders. The amendments became effective on August 1.

In July, the SFC signed a Declaration on Mutual Recognition of Cross-border Offering of Collective Investment Schemes with the Australian Securities and Investments Commission (ASIC). The Declaration provides the framework for the mutual recognition by the SFC and ASIC of schemes offered to retail investors and is a significant milestone towards strengthening regulatory ties and co-operation between Australia and Hong Kong.

Upon conclusion of a month-long public consultation, the SFC amended a set of guidelines to exempt open-ended collective investment schemes offered to the public and listed locally as corporations from disclosure of interests requirements under Part XV of the SFO. The exemption came into effect on October 31. Currently, most of the ETFs listed in Hong Kong are in trust form, which are not subject to the disclosure requirements. Like these trust-form ETFs, corporate-form ETFs are open- ended in nature. Both now enjoy the same disclosure treatment after the amendment.

Following the launch of a pilot scheme requiring a new listing applicant to post prior to its issue of a listing document a web proof information pack4 (WPIP) on the HKEX or GEM website, the SFC and the HKEX reviewed the operation of the pilot scheme and identified no major defect. The SFC and HKEX would consider formally codifying the requirement in the Listing Rules.

In light of the volatile market condition in 2008, the SFC enhanced monitoring of the financial integrity of licensed corporations by carrying out intensive and focused risk assessments and required rectification actions where deficiencies in risk management were identified. Circulars were issued to the industry reminding them

4

A WPIP is a near-final draft listing document with the omission of pricing and offer size information intended to address the apparent inequality of information dissemination between institutional and retail investors in an initial public offering.