A reminder on SFC market sounding guidelines for block trades (Hong Kong)

On 2 May 2025, the Securities and Futures Commission (SFC) of Hong Kong will implement new market sounding guidelines aimed at improving transparency and safeguarding the integrity of block trades involving securities listed on the Hong Kong Stock Exchange (HKEX).

Key Highlights of the Guidelines

• Scope: The guidelines apply to Disclosing Persons (typically sellers or their agents) and Recipient Persons (potential buyers) involved in market soundings related to block trades.
• Pre-sounding Procedures: Disclosing Persons must conduct due diligence to ensure Recipient Persons are appropriate and understand confidentiality obligations.
• Information Disclosure: Clear communication of the purpose, scope, and confidentiality requirements of the market sounding is mandatory.
• Record Keeping: Both parties must maintain detailed records of communications and information exchanged during the sounding process.
• Compliance and Enforcement: The SFC will monitor adherence to these guidelines to prevent market abuse and insider trading risks.

Implications for Market Participants

Market participants engaged in block trades should review and update their internal policies and training programs to align with the new guidelines. Enhanced documentation and compliance controls will be essential to meet regulatory expectations and avoid enforcement actions.

Conclusion

The introduction of these market sounding guidelines reflects the SFC's commitment to fostering a fair and transparent trading environment in Hong Kong. Market participants are encouraged to familiarize themselves with the detailed requirements and prepare for the compliance deadline.

Sources:

• SFC Market Sounding Guidelines
• HKEX Regulatory Announcement on Market Sounding Guidelines