With an eye to enhancing the efficiency and liquidity of its capital market, Hong Kong should update the qualifying conditions for stock borrowing transactions by removing and simplifying non-substantive administrative requirements and by expanding the exemption scope to accommodate genuine funding transactions commonly adopted in the market, according to a recent report.

The report, Enhancing Market Liquidity and Efficiency: Optimising Stock Trading Mechanism and Operations in Hong Kong, released by the territory’s Financial Services Development Council, also recommends:

• enhancing the use of Hong Kong stocks as collateral in diverse financial transactions
• creating a level playing field for intermediary facilitation activities
• elevating the pivotal role of the jobbing business in stimulating the trading activities in Hong Kong and providing clear guidance on the practical requirements for options market makers
• adding electronic stamp duty payment for off-market transactions.

“The success of an efficient capital market lies in the balance of investor protection and staying ahead of the latest market development,” says Laurence Li, FSDC chairman. “The capability of our market infrastructure to facilitate seamless transactions for both domestic and international investors contributes to Hong Kong’s triumph.

“To maintain its position as an equity trading hub and one of the world’s leading capital markets, Hong Kong must not rest on its laurels. It is essential to keep evaluating the competitiveness of the stock trading mechanism to address evolving market needs and solidify its global and regional standing, thereby attracting and retaining investors.”