The Zhitong Finance App learned that on June 17, the Hong Kong Financial Services Council published a research report entitled “Promoting the Dual Growth of Liquidity and Efficiency: Optimizing Hong Kong Stock Exchange Mechanisms and Market Operations”. Drawing on the challenges faced by various market participants, the report puts forward corresponding recommendations aimed at improving the efficiency and liquidity of Hong Kong's capital market. Policy suggestions include: (1) updating the eligibility criteria for securities borrowing transactions, removing and simplifying non-substantive administrative requirements, and expanding the scope of exemptions to match actual financing transactions commonly used in the market; (2) strengthening the use of Hong Kong stocks as collateral for diversified financial transactions; (3) establishing a level playing field for intermediary facilitation activities; (4) enhancing the important position of securities distribution business to stimulate trading activity in the Hong Kong market; and (5) providing electronic stamp duty payment services for OTC transaction documents and transfer documents .
According to the report, as an outstanding international financial center, Hong Kong's capital market has made remarkable achievements in the past. Under sound supervision and an honest market, investors' rights and interests are protected, opening the door for global investors to invest in mainland China. Perfect infrastructure, efficient trading and settlement mechanisms, and deep market depth are the cornerstones of its success. It brings together diverse financial products, including stocks, bonds, derivatives and exchange-traded funds (ETFs), and invites investors to participate in active trading. The market is characterized by transparency, openness, and efficient operation, and is supported by moderate resources, which enhances the confidence of domestic and foreign investors. This series of conditions promotes the continuous expansion and prosperity of the market. At the same time, Hong Kong's resilience, flexibility and accurate capital allocation have enabled it to withstand various challenges and strengthen its position as an international financial center.
An effective capital market requires the integration of various elements, not only to simplify transactions, but also to establish good market supervision. Among them, stamp duty plays an important role in Hong Kong's securities trading system. It is also a basic fiscal policy tool for the Hong Kong government to pay taxes, that is, a tax levied through various legal documents. In Hong Kong, transaction documents transferring any Hong Kong securities are subject to stamp duty. This directly affects the cost of securities transactions, and therefore has a visible impact on the Hong Kong financial market. However, despite the changing financial market environment, the Stamp Duty Regulations enacted in 1981 and its administrative procedures have yet to be fully reviewed to reflect the development and changes in the securities market.
The Hong Kong Government recently announced a reduction in the stamp duty rate and the introduction of electronic stamping services for some transactions. Although these measures show an attitude of moving towards modernization, they are unable to fully meet the changing needs of the market, nor have they fully solved the problems existing in the existing framework. The imposition of stamp duty affects various activities in the securities market, particularly securities borrowing and lending, securities collateral, intermediary functions, securities distribution operations, and electronic payment of stamp duty.
Industry insiders strongly believe that financial products and services have been upgraded iteratively, new trading practices have been introduced, and the volume of securities transactions is constantly increasing, yet the current legal framework and administrative procedures are not progressing at the same time. The discrepancy between legal regulations and market practices will affect the operating efficiency of participants in the Hong Kong securities market.
In view of this, Hong Kong needs to adopt a pragmatic approach to update and modernize stamp duty legislation to stabilize the competitiveness of Hong Kong's capital market and bring it into line with international standards. The work to update stamp duty legislation is critical to bridging the gap between current legal requirements and financial markets, simplifying compliance procedures, and building an innovative and adaptable financial industry in Hong Kong.
In view of this, the Hong Kong Financial Services Council set up a special working group composed of industry experts to gather market feedback and formulate policy suggestions for consideration by the Hong Kong Government and public stakeholders.
Based on these expert opinions, this report outlines the overall framework for updating Hong Kong's stamp duty legislation from three aspects. These targeted measures are aimed at improving operational efficiency issues, reducing administrative costs, and reducing operational risks associated with existing manual processes, thereby strengthening Hong Kong's position as a leading global financial center, and will not have a significant impact on stamp duty revenue.
Senior Counsel Lee Luk-yan, Chairman of the Hong Kong Financial Services Council, said, “The key to the success of an efficient capital market is how to balance investor protection and keeping up with market development. Our market infrastructure has the ability to facilitate seamless transactions between domestic and foreign investors and is the foundation for Hong Kong's success. To maintain its position as a stock trading center and one of the leading global capital markets, Hong Kong must not stand idly by; it is necessary to continuously review the competitiveness of its trading mechanisms to meet changing market demands and strengthen its global and regional leadership position, so as to continue to maintain investors' confidence in Hong Kong and attract more investors.”