Exchange in uproar over HSBC stock

THE debut of HSBC Holdings on the London stock market turned into a fiasco yesterday, when market makers said they would not deal in more than 500 of the Hong Kong dollar shares at a time.

Market makers and institutions protested at the confusion, which many blamed on the Stock Exchange's FT-SE 100 steering committee. One market maker described the reaction as uproar, and said it was ludicrous so few shares could be bought in a pounds 6bn company that includes Midland.

Investors, too, were alarmed at the nominal amounts available to buy and sell. Shortage of stock to buy led to a 5 per cent price premium for the HK dollar shares over the sterling equivalents, which trade alongside them.

There were complaints that the price differentials would make a nonsense of the FT-SE 100 calculations when HSBC Holdings enters the index officially on Monday. One investing institution was said to be prepared to take legal action if it lost money.

A spokesman for the Stock Exchange said he expected arbitrage between London and Hong Kong to solve the problem of price differentials over the next couple of weeks, with market makers building up their holdings in London. The size of trades would increase as a result.

The problem arose because the two types of share are to be traded alongside each other in London, now William Purves, Hongkong chairman, has gone wholly unconditional in the takeover of Midland Bank. Each price is calculated separately in sterling for the FT-SE index. The confusion began on Thursday, when market makers told the Stock Exchange that they would not deal in the HK dollar shares, because of a lack of stock in London, technical problems in settlement, and the need to pay to obtain stock in Hong Kong to sell in London.

Yesterday morning the FT-SE 100 steering committee met to discuss whether HSBC Holdings could continue in the index with its full weighting, given the inability to trade the HK dollar stock in London.

Index funds, which have built up positions in HSBC on the assumption that it would be fully in the index, feared that only the sterling shares would count towards the index. But sterling shares are only a third of the total.

Intensive efforts by James Capel, HSBC's brokers, persuaded six market makers to change their minds, but only to trade in lots of 500. The committee then decided the whole of HSBC could count in the index. Trading began at 2.30 pm.

One informed market source said he was 'amazed and appalled' at the behaviour of the FT-SE steering committee.

(Photograph omitted)

Start your day with The Independent, sign up for daily news emails
News
newsAnother week, another dress controversy on the internet
Life and Style
Scientist have developed a test which predicts whether you'll live for another ten years
health
Life and Style
Marie had fake ID, in the name of Johanna Koch, after she evaded capture by the Nazis in wartime Berlin
historyOne woman's secret life as a Jew in wartime Berlin
News
news... and what your reaction to the creatures above says about you
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn