Views sought as HKEX targets IPO pricing-to-trading in a day

Hong Kong Exchanges and Clearing (0388) yesterday launched a public consultation on a new proposal that could shorten the time gap between pricing and trading to as little as one business day.

The local exchange operator said it will introduce a new web-based platform called Fini, or Fast Interface for New Issuance, which enables IPO market participants, advisers, and regulators to interact digitally and seamlessly.

Fini is envisaged to be launched no earlier than the second quarter of 2022, which will reduce the current 5-day settlement timeframe by as much as 80 percent, it said.

Retail investors will no longer need to pay high margin interest for IPO subscriptions after reducing the IPO timeframe, chief executive Charles Li Xiaojia said.

The new platform will alter the pre-funding mechanism, under which issuers will only collect the actual share allotment value from each broker after balloting.

Retail investors still have to pay at least 10 percent of subscription value in cash to the intermediary, while the remainder may be supported by either cash or committed credit facilities.

The plan could avoid significant liquidity being frozen due to mega IPOs, which cause short-term shock and fluctuations in the money market, Li said.

Especially for companies already listed in other bourses, the new arrangement will help lower volatility risks, he added.

HKEX also proposes to embrace fully digital interactions in the local IPO market.

Fini will support online data entry by brokers on investors' behalf, alongside traditional file uploads and API messaging to replace paper-based subscription forms, faxes and cheques, it added.

HKEX's listing division, wholly-owned subsidiary Hong Kong Securities Clearing Company, and the Securities and Futures Commission will use FINI to oversee the settlement process for each IPO as it happens, providing certain acknowledgments and approvals that may be required during the process directly via the new platform.

FINI will be managed by HKSCC alongside the existing Central Clearing and Settlement System, the bourse operator said.

The deadline for the consultation is January 15, 2021.