Hong Kong’s SFC issues statement on new National Security Law

Hong Kong’s Securities and Futures Commission (SFC) has been involved in discussions with globally active financial institutions operating in its markets. These conversations have centred on concerns expressed by firms about the potential ambit and effect of the new National Security Law (NSL) on the way they currently do business in Hong Kong.

As a result of these discussions, the SFC has issued a statement.

The SFC says that it is not aware of any aspect of the NSL which would affect or alter the existing ways in which firms and listed companies originate, access, disseminate and transmit financial market and related business information under the regulatory regime it administers. For example, the principles applicable to, and methodologies used by, analysts in terms of the sources of information and data they use and the manner in which their views and opinions are expressed in their reports should remain unaltered.

Furthermore, the rules and accepted practices governing market trading activities, including in exchange traded and over-the-counter derivative markets, the use of hedging strategies and activities under Hong Kong’s short selling regime, also remain unaltered; all related regulations will be administered by the SFC in the same manner as before the advent of the NSL.

Since the enactment of the NSL, the stock and derivatives markets in Hong Kong have operated in an orderly manner, and trading in the Hong Kong stock market has been very active, the regulator notes. In the first half of July average daily trading increased substantially, with the participation of a range of local and international investors, as well as Mainland investors through Stock Connect. Northbound trading through Stock Connect by international investors doubled.

The SFC says it will continue to regulate Hong Kong’s markets as it has done so before the NSL was enacted.