Debt Securities

Debt securities that can be listed on the Stock Exchange include (without limitation):

• convertible / exchangeable bonds;


• asset backed securities;

• green / social / sustainable / sustainability-linked bonds;

• perpetual securities;
       
• Sukuk bonds; and
  
  
• exchange fund notes (EFN). For more information on EFN, please refer to Exchange Fund Notes Information for Investors on the Hong Kong Monetary Authority website.

The above-mentioned debt securities may be listed under:

• Chapter 22 to Chapter 36 of the Main Board Listing Rules  - these debt securities can be invested by public investors, or
  
   
• Chapter 37 of the Main Board Listing Rules (“Chapter 37”)  - these debt securities are offered to professional investors (as defined under Chapter 37) only and not offered to public investors in Hong Kong.

Professional Debts are targeted at professional investors only who are sufficiently sophisticated to determine whether a listing document provides them with the necessary information to make an informed investment decision. These debts are offered to professional investors as defined in Part 1 of Schedule 1 to the Securities and Futures Ordinance (Cap. 571), including authorized financial institutions, insurance companies and high net worth individuals or corporations having investment portfolio of not less than certain prescribed amounts.

Professional Debts are intended for investment by professional investors only. Chapter 37, under which Professional Debts are listed, is not designed to contain provisions for the protection of retail investors. Professional Debts have a higher value minimum board lot of HK$500,000 which is intended to limit retail investors’ access to the Professional Debts market.

Investors may refer to the “List of Debt Issued to Professional Investors” in “Debt Securities” under the section headed “Our Products” on the HKEX website.

The Listing Rules requires the front page of the listing documents of Professional Debts to contain a statement that the relevant Professional Debts are intended for purchase by professional investors only in Hong Kong. Investors can review the listing documents to find out if the relevant debt securities are for professional investors only.

Listing documents of Professional Debts are required to be published on the HKEXnews website on the listing date. Professional investors may also contact the intermediaries or brokers offering the Professional Debts to obtain the relevant listing documents.

It depends on whether the debt securities are eligible for settlement in the Central Clearing and Settlement System (CCASS).

The accrued interests for all CCASS settled debt securities are disseminated to clients of the Exchange such as information vendors through the Exchange’s market data platform. Investors may contact their brokers or subscribe for the information through information vendors which provide such information.

Some listed debt securities, including most of the Professional Debts, are not admitted into CCASS for clearing and settlement purpose. Trades executed on the Exchange may be settled outside CCASS through other means according to the issuer’s listing documents. Investors who want to trade in these debt securities should check with their brokers on settlement arrangements, including accrued interests, before they trade.

It depends on whether the debt securities have been admitted into CCASS for settlement.

If the trade is settled in CCASS, CCASS will automatically add the accrued interest onto the trade value to come up with the final settlement amount, where the buyer of the debt securities will pay to the seller the purchase price plus an amount equal to the interest accrued from the last interest payment date (or the issue date) to the settlement date stipulated by CCASS.  If the trade is settled outside CCASS, the buyer and seller will separately work with their brokers and agree on the settlement arrangements and settlement amount with reference to the settlement date.

Only professional investors (as defined in Part 1 of Schedule 1 to the Securities and Futures Ordinance (Cap. 571)) should trade in Professional Debts. Exchange Participants should exercise special caution when handling client order instructions to ensure the suitability of their clients to trade in these securities.

Before accepting any instruction to purchase Professional Debts from a client, an exchange participant should conduct appropriate know-your-client procedures to ensure that such client is a professional investor in accordance with the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission. If such client is an intermediary placing orders to the exchange participant as agent on behalf of its underlying customers, the exchange participant should ensure that those underlying customers who purchase Professional Debts through an intermediate broker are also professional investors.

Exchange participants shall implement appropriate and effective measures to ensure compliance with the above requirements under the SEHK Rules. Failure to comply with such requirements may constitute a situation calling for disciplinary action under the SEHK Rules.

In addition, where the relevant debt securities are not cleared through CCASS, the Exchange Participants should ensure appropriate payment and settlement arrangements are put in place before conducting any transactions for their clients on the Exchange.

Exchange participants should already have in place appropriate controls to comply with the investor eligibility requirement in relation to Professional Debts and necessary measures to rectify any non-compliance. For example, exchange participants should have prior agreement with their clients that a non-professional investor may be requested to unwind its debt securities positions as soon as possible.

As is the case of any violation of the SEHK Rules, an exchange participant should report to the Exchange if it had executed an order for a non-professional investor to purchase such debt securities. In addition, the exchange participant shall consider taking, or the Exchange may require the exchange participant to take, such actions or measures as may be necessary to remedy or rectify any non-compliance, for example, acquiring the positions of the non-professional investors; or to prevent any further non-compliance.

The Exchange takes any non-compliance seriously and will review and follow up on each incident. Follow-up actions may include issuing warning letters, conducting further enquiries, commencing investigations and reporting the matter to the SFC.