Hong Kong to tighten market rules

Hong Kong on Monday unveiled plans to tighten regulations governing its financial markets and beef up the chief executive's authority over the stock and futures exchanges in the latest moves against speculators. In the plans outlined before the legislative council, the government proposed strict rules on short-selling, including a proposal to criminalise unreported short-selling and beef up penalties for illegal short-selling. Investors who sell short are gambling on a fall in the market. They borrow stock and then sell it with a view to buying it back later at a lower price. The government said that authority may have to be extended to the stock and futures exchanges as well as the Hong Kong Securities Clearing Company.

``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,'' a government statement said. The government also took aim at disorderlysettlement of trades, proposing the Hong Kong Securities Clearing Co revise its settlement rules to ensure that all deals are settled two days after execution (T+2). The proposed measures follow weekend changes designed to strengthen the Hong Kong dollar's peg to the US dollar, which drastically lowered interest rates on Monday and lifted the stock market.

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