07.06.2021

HKEX To Shorten IPO Settlement

Hong Kong Exchanges and Clearing Limited (HKEX) is pleased to announce that it will proceed to introduce a new platform, FINI (Fast Interface for New Issuance), to comprehensively streamline and digitalise Hong Kong’s IPO settlement process. The published conclusions to the November 2020 FINI Concept Paper show overwhelming support for this next phase in the modernisation of Hong Kong’s IPO market.

HKEX received a total of 49 responses to its Concept Paper from stakeholders across the buy-side and sell-side of Hong Kong’s IPO market, with 90 per cent expressing support for the introduction of FINI. The vast majority of the respondents agreed that FINI would benefit Hong Kong’s IPO market by reducing market risk, increasing efficiency, modernising participants’ interactions and laying a competitive digital foundation for Hong Kong’s primary market infrastructure.

HKEX Chief Executive Officer Nicolas Aguzin said: “We are delighted that our proposal to modernise Hong Kong’s IPO settlement process received such strong support from the market.  The introduction of FINI will shorten the cycle between IPO pricing and the start of trading, driving market efficiency and reinforcing Hong Kong’s position as the world’s premier IPO market.”

Hong Kong currently has a T+5 settlement cycle, and the Concept Paper set out proposals to reduce this to T+1. Having consulted the market and taking into account respondents’ feedback and operational needs, HKEX will proceed with the development of FINI for handling all Hong Kong IPOs, initially adopting a T+2 settlement cycle1.

FINI will also address the issue of excessive liquidity lock-up in heavily oversubscribed IPOs, by allowing clearing participants to opt in for a compressed prefunding requirement in certain circumstances, which could release significant sums of liquid funds that would otherwise be locked up during the IPO subscription period.

“The launch of FINI demonstrates HKEX’s ongoing commitment to collaborating with the market in developing the optimum technological platforms and processes. This will allow us to, together, shape our future, delivering benefits for the market as a whole. We would like to thank everyone for their valuable feedback and insight in refining the FINI proposals, and we look forward to closely working with the market as we roll out this major innovation,” Mr Aguzin added.

Through FINI, brokers, share registrars, IPO sponsors, lawyers, underwriters, distributors and regulators will be able to use this new digital platform to execute their respective roles and to coordinate workflows during the listing initiation, subscription, pricing, allotment, payment, regulatory approval and stock admission processes.

HKEX plans to ensure that there is ample time for market readiness ahead of the introduction of FINI and therefore expects FINI to be rolled out in the fourth quarter of 2022, at the earliest. HKEX will invite market participants to join education sessions, on-boarding, market-wide testing and rehearsals to ensure a smooth transition in due course. Separate announcements and consultations, where necessary, with respect to the Listing Rules and other operational procedures will also be made later.

The FINI Concept Paper Conclusions and FINI Information Pack, containing frequently asked questions, are available on the HKEX website.

Note:

  1. A T+3 or longer IPO settlement period will be possible upon advance request by issuers.

Source: HKEX

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