The Securities & Futures Commission has proposed introducing limits on repledging for securities margin financing in two stages - 180% initially with a target date of October 1 and dropping to 140% after 12 months.

The Commission today issued the document, Consultation Conclusions on Proposed Measures to Address Risks Arising from Securities Margin Financing, setting out measures for a balanced and fair package that would offer better protection for investors, while having minimum impact on the industry.

The Commission's Intermediaries and Investment Products Executive Director, Alexa Lam, said the market had been doing well in the past two years.

"Brokers have generally benefited from the significant increases in market capitalisation and daily trading volume.

"On the other hand, factors such as increased market volatility and recent reported cases of misappropriation may give rise to additional risks to investors and the industry. Therefore, the commission considers that this is the right time to proceed with the proposed measures to give investors better protection," she said.

The measures seek to:

* introduce limits on repledging in two stages - 180% initially with a target date of October 1 and dropping to 140% after 12 months as recommended by the working group;

* make some moderate changes to selected FRR haircut percentages;

* improve transparency by providing margin clients with better disclosure about the risks of pooling and repledging; and

* provide relaxation of certain requirements currently imposed on firms, as pooling risk will be reduced by the proposed measures.

Ms Lam believed this balanced package of measures would help protect the investing public and provide a stronger foundation for the long-term development of the industry, and it would strengthen Hong Kong's reputation as an international financial centre.