HKEX$(00388)$rose 4% in wednesday morning trading.
Through a digital platform known as “FINI,” brokers, underwriters and regulators and other involved parties will be able to monitor and coordinate work flow of the whole process through to the start of trading, according to a Hong Kong Exchanges & Clearing Ltd. statement on Tuesday.
The change will allow for a settlement cycle of two days, known as T+2, paring back an initial proposal of just one settlement day. The shorter cycle will likely cut income for brokerages who can earn interest on cash placed by investors during the settlement period.
The move will drive market efficiency and reinforce “Hong Kong’s position as the world’s premier IPO market,” HKEX’s Chief Executive Officer Nicolas Aguzin said in thestatement.
Hong Kong has seen HK$30.32 billion ($3.9 billion) raised through IPOs so far this year. But the long settlement cycle has often dried up liquidity in the local money market, pushing up short-term interest rates and adding risks for the city’s currency peg with dollar.
The new platform would help to solve another local problem where retail investors have placed duplicate orders through different brokers to have a better chance of getting shares in popular IPOs, a practice that has been banned by local securities rules but has yet to be eradicated over the years.
The bourse also announced that starting Monday all companies seeking to sell shares on the Asian bourse must do itentirely electronically.
Hong Kong Looks to Speed Up IPO Process to Reduce Risks (1)