SEHK primary and secondary markets

Topic 2 follows a share from its first issue to its daily trading. The primary market half covers why companies list, the Main Board and GEM entry tests, the listing methods, who does what in an IPO, the listing hearing, the roadshow, the prospectus and FINI. The secondary market half covers trading, corporate actions, clearing and settlement, surveillance and what listed issuers must report. Expect figure questions (profit test, public float, free float, clawback, T+2) and questions that hand you a deal and ask which listing method or which adviser it involves.

27 min read15 sections

Checked October 2026 against: HKEX consolidated Main Board Listing Rules (July 2026 edition, including the 4 August 2025 and 1 January 2026 public float amendments) chapters 1, 2A, 3A, 4, 7, 8, 9, 10, 11, 12, 14 and Practice Notes 18 and 22; HKEX consolidated GEM Listing Rules (rules 2.12, 6A.19, 11.12A, 11.23, 11.23A); HKEX FINI webpage and FINI Information Pack (FAQ); HKEX Uncertificated Securities Market webpage; SFC Code of Conduct para 21 (capital market intermediaries); Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) s.38D (elegislation.gov.hk). Checked against the Main Board Listing Rules (Rules 1.01, 7.19-7.27B, 13.09-13.10A, 13.25A-13.25B, 13.36, 13.45-13.50, 13.64-13.66, Appendix C3) and GEM Listing Rules (18.03, 18.49, 18.53, 18.78, 18.79) on en-rules.hkex.com.hk; HKEX Guide on trading arrangements for selected types of corporate actions (last updated June 2026); HKEX Trading Mechanism and Clearing Services pages; SFO (Cap. 571) s.21, s.181, s.307B, s.307D, s.307N, s.313, s.315, s.324, s.325, s.341, s.347, s.348 and Cap. 571V s.8-s.9 on elegislation.gov.hk; as at October 2026. Independent prep, not endorsed by HKSI Institute or the SFC.

Must-know for the exam

Main Board profit test: profit HK$35m in the latest year and HK$45m over the two years before, a three-year record and HK$500m market capitalisation (MBLR 8.05(1), 8.09(2)).
Initial public float since 4 August 2025: 25% up to HK$6bn; HK$6bn-30bn, higher of 15% or HK$1.5bn; above HK$30bn, higher of 10% or HK$4.5bn (MBLR 8.08(1)).
Free float at listing: unrestricted public shares of 10% worth HK$50m (GEM HK$15m), or worth HK$600m. Holders: Main Board 300, GEM 100 (MBLR 8.08A, 8.08(2); GEM 11.23).
GEM entry: two-year record and HK$30m operating cash flow, or HK$250m market cap with revenue and R&D tests; HK$150m minimum market capitalisation (GEM 11.12A, 11.23(6)).
FINI is mandatory for every New Listing (MBLR 9.09A) and in use since 22 November 2023: IPO shares can start trading at T+2, two business days after pricing.
Theoretical ex-rights price = (old shares x cum price + new shares x subscription price) / total shares; a nil-paid right is worth that price minus the subscription price.
General mandate placings: at most 20% of issued shares at the resolution date, priced at a discount below 20% to the benchmarked price (Main Board Rule 13.36(2)(b), (5)).
Main Board and GEM: annual results within 3 months, annual report within 4 months, interim results within 2 months, interim report within 3 months (MB Rules 13.46-13.49).
A trading halt lasts no more than 2 trading days, then becomes a suspension; issuers must apply for one when an announcement cannot be made promptly (MB Rules 1.01, 13.10A).
HKSCC is central counterparty by novation; SEHK trades settle in CCASS on T+2 under continuous net settlement, so shares go ex the business day before the record date.

On this page · 15 sections

Traps that cost marks

Treating any large or off-exchange trade as primary. What matters is whether securities are being issued or sold for the first time, not where or how big the trade is.
Labelling the whole IPO by one method. New shares are subscribed and existing shares are sold, so one offering can combine both methods.
Picking 'I and III only' because acquisitions feel like a corporate finance detail. Listed shares as acquisition currency is a classic advantage of listing.
Overstating the lock-up. It lasts 6 months plus 6 months under r.10.07, not for as long as the founders hold shares.
Treating GEM's risk warning as a professional-investor restriction. GEM shares trade on SEHK like any other.
Checking only the aggregate R&D figure. The 15% ratio must be met in each of the two years, not on average.
Adding the three years to HK$80 million. The test has two separate limbs: HK$35 million in the latest year and HK$45 million across the two years before.
Carrying the HK$500 million revenue figure across all three tests. Only the two market capitalisation tests use it.

The primary market and why companies list

The primary market is where securities are sold to investors for the first time. In an initial public offering (IPO) a company lists its shares on the Stock Exchange of Hong Kong (SEHK). If the company issues new shares, it receives the money. If existing shareholders sell, they receive it. The secondary market is the later trading of those shares between investors, where the company receives nothing.

Advantages of listing	Disadvantages of listing
Raises new capital for growth or to repay debt	High one-off costs: underwriting commission, sponsor, lawyers, accountants and listing fees
Gives existing shareholders a market in which to sell (liquidity and exit)	Continuing obligations: results, announcements, inside information disclosure and governance rules
Easier follow-on funding through placings and rights issues	Dilution of the founders' stake and control, and exposure to takeover
Listed shares can pay for acquisitions and fund employee share schemes	Public scrutiny of results and pressure for short-term performance
Higher profile and credibility with customers, lenders and staff	Directors' dealings and many transactions need disclosure or shareholder approval

Trap: assuming every IPO raises money for the company. In an offer for sale the selling shareholders take the proceeds; in an introduction no money is raised at all.

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LE Paper 8 · Topic 2

SEHK primary and secondary markets

27 min read15 sections

Must-know for the exam

Main Board profit test: profit HK$35m in the latest year and HK$45m over the two years before, a three-year record and HK$500m market capitalisation (MBLR 8.05(1), 8.09(2)).
Initial public float since 4 August 2025: 25% up to HK$6bn; HK$6bn-30bn, higher of 15% or HK$1.5bn; above HK$30bn, higher of 10% or HK$4.5bn (MBLR 8.08(1)).
Free float at listing: unrestricted public shares of 10% worth HK$50m (GEM HK$15m), or worth HK$600m. Holders: Main Board 300, GEM 100 (MBLR 8.08A, 8.08(2); GEM 11.23).
GEM entry: two-year record and HK$30m operating cash flow, or HK$250m market cap with revenue and R&D tests; HK$150m minimum market capitalisation (GEM 11.12A, 11.23(6)).
FINI is mandatory for every New Listing (MBLR 9.09A) and in use since 22 November 2023: IPO shares can start trading at T+2, two business days after pricing.
Theoretical ex-rights price = (old shares x cum price + new shares x subscription price) / total shares; a nil-paid right is worth that price minus the subscription price.
General mandate placings: at most 20% of issued shares at the resolution date, priced at a discount below 20% to the benchmarked price (Main Board Rule 13.36(2)(b), (5)).
Main Board and GEM: annual results within 3 months, annual report within 4 months, interim results within 2 months, interim report within 3 months (MB Rules 13.46-13.49).
A trading halt lasts no more than 2 trading days, then becomes a suspension; issuers must apply for one when an announcement cannot be made promptly (MB Rules 1.01, 13.10A).
HKSCC is central counterparty by novation; SEHK trades settle in CCASS on T+2 under continuous net settlement, so shares go ex the business day before the record date.

On this page · 15 sections

Traps that cost marks

Treating any large or off-exchange trade as primary. What matters is whether securities are being issued or sold for the first time, not where or how big the trade is.
Labelling the whole IPO by one method. New shares are subscribed and existing shares are sold, so one offering can combine both methods.
Picking 'I and III only' because acquisitions feel like a corporate finance detail. Listed shares as acquisition currency is a classic advantage of listing.
Overstating the lock-up. It lasts 6 months plus 6 months under r.10.07, not for as long as the founders hold shares.
Treating GEM's risk warning as a professional-investor restriction. GEM shares trade on SEHK like any other.
Checking only the aggregate R&D figure. The 15% ratio must be met in each of the two years, not on average.
Adding the three years to HK$80 million. The test has two separate limbs: HK$35 million in the latest year and HK$45 million across the two years before.
Carrying the HK$500 million revenue figure across all three tests. Only the two market capitalisation tests use it.

The primary market and why companies list

Advantages of listing	Disadvantages of listing
Raises new capital for growth or to repay debt	High one-off costs: underwriting commission, sponsor, lawyers, accountants and listing fees
Gives existing shareholders a market in which to sell (liquidity and exit)	Continuing obligations: results, announcements, inside information disclosure and governance rules
Easier follow-on funding through placings and rights issues	Dilution of the founders' stake and control, and exposure to takeover
Listed shares can pay for acquisitions and fund employee share schemes	Public scrutiny of results and pressure for short-term performance
Higher profile and credibility with customers, lenders and staff	Directors' dealings and many transactions need disclosure or shareholder approval

Trap: assuming every IPO raises money for the company. In an offer for sale the selling shareholders take the proceeds; in an introduction no money is raised at all.

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Main Board and GEM

SEHK runs two equity markets, each with its own rulebook: the Main Board Listing Rules and the GEM Listing Rules. GEM is positioned for small and mid-sized companies that may carry higher investment risk, and its issuers must say so in their listing documents (GEM Rule 2.12). Anyone may trade GEM shares, and a GEM applicant still needs a sponsor.

Point	Main Board	GEM
Trading record	At least 3 financial years (8.05)	At least 2 financial years (GEM 11.12A)
Financial tests	Profit; market cap/revenue/cash flow; market cap/revenue (8.05)	Operating cash flow HK$30m over 2 years; or market cap/revenue/R&D (GEM 11.12A)
Minimum market capitalisation	HK$500 million (8.09(2))	HK$150 million (GEM 11.23(6))
Minimum public holders	300 (8.08(2))	100, as a guideline (GEM 11.23(2)(b))
Free float, percentage limb	10% worth at least HK$50 million (8.08A)	10% worth at least HK$15 million (GEM 11.23A)

The GEM market cap/revenue/R&D test (GEM 11.12A(4)) needs: market capitalisation of at least HK$250 million; revenue of at least HK$100 million over the two years, with year-on-year growth; R&D spending of at least HK$30 million over the two years; and R&D of at least 15% of total operating expenditure in each of the two years.

Trap: treating GEM as a professional-investors-only market, or applying Main Board figures to GEM. GEM has its own lower figures and a two-year record.

Takeaway: Main Board: 3 years, HK$500m, 300 holders. GEM: 2 years, HK$150m, 100 holders, HK$30m cash flow or the R&D test.