Participating in the Exchanges and Accessing Public Capital
This topic explains how trades are executed, cleared and settled on HKEX, and the framework through which companies raise money from the public: the listing regime and its eligibility tests, the IPO mechanics, the prospectus and dual-filing requirements, and the SFC-administered Takeovers Code. It ties the market operator (from the overview topic) to the day-to-day plumbing of the market.
Trading, clearing and settlement through CCASS
Securities trades on the Stock Exchange of Hong Kong (SEHK) are matched electronically through the exchange's automatic order-matching and execution system and are traded in multiples of a 'board lot', the size of which is set by each issuer and therefore varies from stock to stock. Trades are cleared and settled through the Central Clearing and Settlement System (CCASS), operated by Hong Kong Securities Clearing Company (HKSCC), largely by electronic book-entry. The normal cycle is T+2: both the stock and the money settle on the second business day after the trade. CCASS uses Continuous Net Settlement (CNS), under which a participant's many trades in a stock on a day are netted down to a single net position to deliver or receive, greatly reducing the volume of movements.
Accessing public capital: the listing regime
A company raises capital from the public by listing its shares, which brings it under the Listing Rules made and administered by the SEHK (with the SFC overseeing and with statutory backing under the SFO). The SEHK operates a Main Board for established companies and GEM (the Growth Enterprise Market), positioned for smaller or growth companies that cannot yet meet Main Board requirements. Listing is not a one-off event: an issuer takes on continuing obligations, including timely disclosure of price-sensitive information (dovetailing with the Part XIVA inside-information duty) and rules on notifiable and connected transactions.
Main Board eligibility: financial tests and public float
A new applicant for a Main Board listing must satisfy one of the alternative financial eligibility tests, together with a minimum market-capitalisation and public-float requirement. The three financial tests are: the profit test (a minimum aggregate profit over a three-year track record plus a minimum market capitalisation at listing); the market-capitalisation/revenue/cash-flow test; and the market-capitalisation/revenue test—the latter two allow larger companies without the requisite profit history to qualify. A new applicant must also ensure a minimum proportion of its shares is held by the public (broadly 25%, with scope for a lower percentage for very large issuers). The precise profit and market-cap thresholds are periodically raised by HKEX, so learn the structure—three alternative tests and a public-float minimum—and verify current figures against the live Listing Rules.
IPO mechanics: sponsors, prospectus and dual filing
In a Hong Kong IPO the sponsor (an SFC-licensed firm for Type 6 corporate-finance work) is responsible for conducting due diligence on the applicant and preparing it for listing, and must be formally appointed at least two months before the listing application is submitted. A public offer of shares requires a prospectus that complies with the statutory content requirements and must be registered with the Registrar of Companies before issue; authorising a prospectus containing an untrue statement carries civil and criminal liability. Under the dual-filing arrangement, listing-application documents filed with the Exchange are simultaneously filed with the SFC, giving the SFC visibility and a statutory role in the vetting of new listings.
IPO allocation and stabilisation tools
Several IPO mechanisms recur in the exam. The clawback mechanism reallocates shares from the placing (institutional) tranche to the public-offer tranche when the public offer is heavily oversubscribed, increasing the retail allocation. The over-allotment option (greenshoe) lets underwriters allot additional shares to meet excess demand, later covered by buying in the market or exercising the option. Price stabilisation is the permitted post-listing buying by (or on behalf of) the underwriters to support the price for a limited period within defined rules—it is a regulated exception to market-manipulation prohibitions, not a free hand. A 'white form' eIPO applicant who is successful has the allotted shares registered in their own name.
Takeovers, mergers and share buy-backs
Changes of control of Hong Kong public companies are governed by the Codes on Takeovers and Mergers and Share Buy-backs, which the SFC administers through its Takeovers Executive and Panel. The Codes are non-statutory—they do not have the force of law—but they are enforced by the SFC and breach can lead to sanctions including 'cold-shoulder' orders. The central rule: a mandatory general offer for all the shares is triggered when a person (with parties acting in concert) acquires 30% or more of the voting rights of a company; and once holding between 30% and 50%, further acquisitions beyond a small annual 'creeper' allowance also trigger an offer. In the exam, remember the 30% mandatory-offer threshold, that the Codes are non-statutory but SFC-enforced, and that HKSCC/CCASS handles settlement on a T+2 cycle.
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