HONG KONG (Reuters) - The dramatic failure of brewer Budweiser APAC’s $9.8 billion Hong Kong listing left “mom and pop” investors badly out of pocket, a local broker has said in an unusual series of full-page advertisements in newspapers across the city on Wednesday.

FILE PHOTO: Portfolio beer brands of Budweiser Brewing Company APAC Ltd are displayed during a news conference on the company's IPO in Hong Kong, China July 4, 2019. REUTERS/Andrew Geoffrey Jackson/File Photo

Bright Smart Securities & Commodities Group Ltd 1428.HK urged bourse operator Hong Kong Exchanges and Clearing Ltd (HKEX) 0388.HK and regulator Securities and Futures Commission (SFC) to reform the listing process.

Retail investors accounted for 23% of trading in Hong Kong last year, far higher than in other major markets such as New York or London. They are also active participants in the city’s initial public offering (IPO) market.

They typically borrow from their brokers to subscribe to IPOs, using the shares they hope to obtain as collateral.

Last Thursday, investors awaited the pricing of Budweiser APAC shares in what would have been the world's largest IPO so far this year. However, Belgian parent Anheuser Busch InBev NV ABI.BR canceled the pricing and called off the IPO the following day.

Retail investors nevertheless had to pay interest on the money they had borrowed to subscribe to the IPO.

Calling off the IPO “made investors pay interest for no reason,” Bright Smart Securities said in its adverts. “If another company shelves its IPO, that company should compensate for paid interest to investors to ensure fairness.”

HKEX and the SFC declined to comment. A spokeswoman for Budweiser APAC said subscriptions for the IPO were done in accordance with local market practice.

Local brokers are a significant force in Hong Kong because of the high level of retail trading. They have a leading role in electing the financial services representative who sits in the city’s Legislative Council - the current representative, Christopher Cheung is chief executive and chairman of broker Christfund Securities.

While brokers have welcomed some reforms to Hong Kong's securities market, they have actively opposed others. In 2012, they took to the streets to protest against plans to shorten the bourse's trading lunch break. (tinyurl.com/y6hvejx2)

Bankers at multinationals and their advisers often privately blame local brokers and retail investors for hindering reforms in the city that would make the market operate more like its U.S. rivals.

While New York IPOs price one evening and begin trading the next morning, Hong Kong deals require a settlement gap of five working days because the system is still largely paper-based.

Retail investors still file paper applications to subscribe for shares and they pay in advance by cheque or cashier order.

Earlier this year the exchange said it was looking to shorten the five-day cycle, and that it was working on a paperless model for the securities market to help them to achieve this.