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Hong Kong Short Position reporting & dizzying denominators

1 min
Posted on May 22 2017 by Karl Schindler

Short position reporting in Hong Kong is particularly complex, as the SFC requires that the calculation utilises official data directly from the HKEX.

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One of the biggest inefficiencies and risks in ensuring compliance with short selling and shareholding disclosure obligations around the world is the requirement to use official regulatory information to perform accurate calculations. There are a number of disclosure rules which require bespoke calculations, or which rely on data which is not readily available from the standard, industry data-providers.

One disclosure calculation where this is the case is the Hong Kong short position reporting. Where most other short position calculations around the globe require a standard denominator such as the total number of outstanding shares for an issuer (or class), this jurisdiction requires that the calculation utilises a denominator equal to the number of issued shares (of a company) which are listed on the HK Stock exchange (HKEX), as specified in question 14 of the Hong Kong SFC’s official Q&A.

This means that other issued shares of the same company, listed outside of the HKEX (such as “A” shares), should not be included in the denominator.

Thankfully, the HKEX officially publishes these bespoke figures on its website. Because manually trawling through each company’s link from the HKEX website would be inefficient and impractical given the requirement to use this data in the calculation on a daily basis, at FundApps we continuously source the information from the HKEX and provide it in our Hong Kong short position reporting calculations automatically. Our engineering team has covered how we source, format and display regulatory data in more detail on our blog.

Taking care of official regulatory information is just another way we can make compliance simple for our clients. Our Shareholding Disclosure service removes the worry of sourcing (and paying for) another data field, and automates some of the most difficult tasks in compliance such as netting and aggregation.