HKSFPA's response to the HKEX's Consultation Conclusions on the Proposed Reduction of Minimum Spreads in the Hong Kong Securities Market
Release Date: 2024-12-17
HKSFPA's response to the HKEX's Consultation Conclusions on the Proposed Reduction of Minimum Spreads in the Hong Kong Securities Market
17 December 2024
The Hong Kong Securities and Futures Professionals Association (HKSFPA) has thoroughly reviewed the Hong Kong Stock Exchange's (HKEX) consultation summary regarding the proposal to Reduction of Minimum Spreads in the Hong Kong Securities Market. We have shared our insights with the media and believe a more detailed examination should focus on the following areas:
1. Support for Enhancing Market Microstructure:
- HKSFPA strongly supports the Exchange's proposal, particularly the two-phase strategy to reduce the minimum price fluctuation. We believe these adjustments will boost market liquidity, decrease trading costs, and improve overall market efficiency. The consultation highlighted a favorable market reaction to these proposals, with substantial support for the initial phase.
2. Advocacy for a Single Price Table Model:
- We oppose the introduction of a multi-price table model, as it could increase complexity and operational costs, potentially leading to market confusion. We advocate retaining a single price table model to maintain simplicity and transparency. This position was also supported in the consultation, with approximately 80% of participants agreeing, indicating a shared industry viewpoint.
3. Recommendations for Quotation Rule Modifications:
- HKSFPA suggests raising the limit price for buy and sell orders from ±24 to ±48 price levels to improve trading flexibility and efficiency. This adjustment would counteract the narrowing effects of reducing the minimum price fluctuation. The Exchange acknowledged this recommendation and considered similar percentage-based adjustments (5%) to align with international standards.
4. Emphasis on Technical and System Readiness:
- We stress the necessity for clear communication and sufficient preparation time for market participants to adapt their systems to the new rules. The Exchange has committed to a minimum of six months' preparation time before implementing each phase, ensuring a smooth transition and readiness.
5. Consideration of Market Liquidity and Investor Impact:
- HKSFPA highlights the need to carefully evaluate the impact on market liquidity and system facilities due to the changes in price fluctuation. The Exchange intends to monitor the effects after the first phase to ensure no adverse impacts on market liquidity occur and will decide on the second phase accordingly.
Mofiz Chan
Chairman
Hong Kong Securities and Futures Professionals Association
2024-08-15 Orange News Thomas Ip | What will the Hong Kong Stock Exchange's reduction of the minimum price fluctuation bring?
On September 18, 2024, a response pertaining to this association was issued
Response to the HKEX Publishes Consultation Paper on Reduction of Minimum Spreads in the Hong Kong Securities Market
17 December 2024
The Hong Kong Securities and Futures Professionals Association (HKSFPA) has thoroughly reviewed the Hong Kong Stock Exchange's (HKEX) consultation summary regarding the proposal to Reduction of Minimum Spreads in the Hong Kong Securities Market. We have shared our insights with the media and believe a more detailed examination should focus on the following areas:
1. Support for Enhancing Market Microstructure:
- HKSFPA strongly supports the Exchange's proposal, particularly the two-phase strategy to reduce the minimum price fluctuation. We believe these adjustments will boost market liquidity, decrease trading costs, and improve overall market efficiency. The consultation highlighted a favorable market reaction to these proposals, with substantial support for the initial phase.
2. Advocacy for a Single Price Table Model:
- We oppose the introduction of a multi-price table model, as it could increase complexity and operational costs, potentially leading to market confusion. We advocate retaining a single price table model to maintain simplicity and transparency. This position was also supported in the consultation, with approximately 80% of participants agreeing, indicating a shared industry viewpoint.
3. Recommendations for Quotation Rule Modifications:
- HKSFPA suggests raising the limit price for buy and sell orders from ±24 to ±48 price levels to improve trading flexibility and efficiency. This adjustment would counteract the narrowing effects of reducing the minimum price fluctuation. The Exchange acknowledged this recommendation and considered similar percentage-based adjustments (5%) to align with international standards.
4. Emphasis on Technical and System Readiness:
- We stress the necessity for clear communication and sufficient preparation time for market participants to adapt their systems to the new rules. The Exchange has committed to a minimum of six months' preparation time before implementing each phase, ensuring a smooth transition and readiness.
5. Consideration of Market Liquidity and Investor Impact:
- HKSFPA highlights the need to carefully evaluate the impact on market liquidity and system facilities due to the changes in price fluctuation. The Exchange intends to monitor the effects after the first phase to ensure no adverse impacts on market liquidity occur and will decide on the second phase accordingly.
Mofiz Chan
Chairman
Hong Kong Securities and Futures Professionals Association
2024-08-15 Orange News Thomas Ip | What will the Hong Kong Stock Exchange's reduction of the minimum price fluctuation bring?
On September 18, 2024, a response pertaining to this association was issued
Response to the HKEX Publishes Consultation Paper on Reduction of Minimum Spreads in the Hong Kong Securities Market