Date
24 January 2017
Ashley Alder, shown in this file photo, flagged a plan to track investor trades in real time in October. Already, it's drawing privacy concerns from brokers and traders. Photo: HKEJ
Ashley Alder, shown in this file photo, flagged a plan to track investor trades in real time in October. Already, it's drawing privacy concerns from brokers and traders. Photo: HKEJ

SFC plan to track trades in real time raises investor concern

Hong Kong’s securities regulator will require identification codes to track investors making trades in real time.

At present, the Securities and Futures Commission (SFC) can monitor live trading only at the broker level.

The new system is part of data protection measures being introduced by the watchdog, Bloomberg reports, citing Keith Lui, SFC executive director for market supervision.

The regulator will consult banks and brokerages on the plan before implementation, he said.

Under the proposal, SFC will assign an identity record to each investor trading in the market.

Improving market surveillance is a priority for regulators worldwide as they seek to avoid disruptions like the US flash crash in May 2010 and combat rogue traders.

The SFC, which already has the authority to order brokers to disclose information about suspicious trades, has been examining the US Securities and Exchange Commission’s plan to improve its ability to scrutinize markets, as well as reviewing markets in China, South Korea and Malaysia, which use investor identity records, Lui said.

SFC chief executive Ashley Alder said in October that the agency would look into the feasibility of identifying market orders for clients rather than brokers.

The proposal for so-called see-through surveillance already is drawing criticism from some brokers and investors.

“It will give the SFC too much unpublished information about what people are doing in the market,” said David Webb, a shareholder activist and member of the SFC’s takeovers and mergers panel.

“If they are thinking of a dragnet surveillance system, then it’s a question how they can demonstrate a public benefit can be achieved from that versus the invasion of privacy that comes from that.”

Jeffrey Chan, a founding partner at Oriental Patron Financial Group in Hong Kong, said he expects the SFC to consult market participants in April.

“The industry has a few concerns,” said Chan, who is also a director at Hong Kong Securities Association Ltd.

Among the worries are that the transfer to the new system would incur additional costs for brokerages and may result in information leaks about their client trading strategies.

The SFC’s access to investor information should be governed by an independent panel and disclosed only on the watchdog’s request when it investigates suspicious transactions, he said.

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