It was a false dawn for retail investors - the SFC has caved in to pressure and amended the license conditions of HSBC's Stockmax Crossing platform to restrict it to "professional investors" only. History will prove them wrong.

HSBC's StockMax becomes StockMin
14 August 2011

Following last Sunday's article, StockMax and competition for HKEx, it comes as little surprise but a great shame that on Monday (8-Aug-2011) the SFC has amended the conditions on HSBA's ATS license to require that the StockMax Crossing platform be limited to "professional investors" as defined in the SFO.

If you want to see what the original conditions looked like, see page 4 of the Mar-2011 licenses and search for the word "retail", and you will see that it clearly contemplated retail investors accessing the platform, as in:

"(3) Provide the Commission with the following statistics on a monthly basis...
(b) The respective volumes of trades originated from proprietary and agency businesses (for agency business, in respect of institutional and retail clients respectively)..."

Accordingly, HSBC has taken down the page on its retail banking site which referred to StockMax as "coming soon", but in the public interest of debate, we have kept a copy.

We can only assume that lobbying from the small brokers, HKEx or the Government has led to this SFC U-turn, rather reminiscent of what the SFC did during the blackout saga over directors' insider dealings, when having "championed" and approved the new Listing Rule, the SFC joined tycoons and the Government in lobbying the Listing Committee to scrap the rule, which they duly did.

Ultimately Hong Kong will have to open its doors to platform innovation and stop protecting the Stock Exchange from competition in this way. For now, though, retail investors are stuck with the wide trading spreads of the Stock Exchange and are prevented by the regulator from achieving price-improvement on other trading systems.

©, 2011

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