Response to the Consultation Paper on Accelerated Settlement for the Hong Kong Cash Market
Release Date: 2026-05-18
| Hong Kong Exchanges and Clearing Limited | Submitted by email |
| 8/F, Two Exchange Square | response@hkex.com.hk |
| 8 Connaught Place, Central | |
| Hong Kong | |
Response to the Consultation Paper on Accelerated Settlement for the Hong Kong Cash Market
Our Association hereby submits its formal response to the Consultation Paper on Accelerated Settlement for the Hong Kong Cash Market (the “Consultation Paper”) published by Hong Kong Exchanges and Clearing Limited (“HKEX”) in 2026. We support the move to a T+1 settlement cycle for the Hong Kong cash market and provide detailed analysis and recommendations on the five core questions and two supplemental questions raised in the Consultation Paper. Our full response is set out below.
Question 1： Do you have any comments on the assessment of the implications for Exchange Traded Products (ETPs) and Stock Options under the proposed T+1 settlement cycle? In particular, please comment on:
• Guiding principles for the ETP primary market;
• Buy-in considerations for ETPs; and
• Stock options (including exercise and assignment).
Our association supports in principle the implementation of the T+1 settlement cycle for the Hong Kong cash equity market and endorses many of the specific arrangements proposed in the Consultation Paper, particularly the extension of settlement instruction activity service hours to 10:00 pm on T-day, the retention of the existing batch settlement framework to reduce market transition costs, and the advancement of the trade amendment deadline to 5:00 pm on T-day. These arrangements pragmatically balance efficiency with operational feasibility. However, we believe that the Consultation Paper’s analysis of certain technical details could be further deepened. With respect to trade amendments, bringing forward the deadline helps clearing participants to finalise their positions earlier, but the industry will need sufficient system testing and frontline staff training to ensure that trade amendments can be completed within the shortened timeframe and that settlement is not affected by amendment delays. Regarding post-trade services, extending the settlement instruction activity service hours to 10:00 pm on T-day is a critical step in the right direction, particularly for international investors in the European and US time zones, as it allows them to complete funding confirmation outside Asian hours and then have the system automatically execute settlement.
Nevertheless, we are concerned that merely extending system input hours will not fully resolve the delays caused by time differences and manual processes within the multi‑layer custody chain. With respect to risk management, we agree that the daily risk payment obligation report should be delayed to 10:00 pm on T-day while keeping the payment deadline at 9:30 am on T+1, as this gives clearing participants sufficient time to estimate their funding requirements. However, we caution that clearing participants, especially small and medium‑sized brokerages, must establish robust internal liquidity management and early warning mechanisms; otherwise, the compressed timeline could easily lead to funding mismatches. Regarding other processes, we support the corresponding adjustments to corporate action ex‑dates and stock conversion arrangements to align with T+1. As for stamp duty arrangements, we call on HKEX to work closely with the tax authorities to ensure that the stamp duty reporting and payment timetable is fully synchronised with T+1, and to provide clear technical guidance to avoid settlement failures caused by administrative process delays.
Question 2： Do you have any comments on the assessment of the implications for Exchange Traded Products (ETPs) and Stock Options under the proposed T+1 settlement cycle? In particular, please comment on:
• Guiding principles for the ETP primary market;
• Buy-in considerations for ETPs; and
• Stock options (including exercise and assignment).
Our association believes that the creation and redemption process for the ETP primary market must be aligned as closely as possible with the T+1 cycle in the secondary market; otherwise, settlement timing mismatches will expose market makers and participating dealers to temporary funding gaps or settlement failures. We are particularly concerned that if the settlement timing of the underlying securities of an ETP, especially overseas underlying securities, is inconsistent with that of the ETP units themselves, the likelihood of creation failures will increase significantly under the compressed T+1 timetable. Therefore, we support the guiding principle set out in the Consultation Paper that primary market settlement should be brought as close to T+1 as practicable, and we urge HKEX to further clarify the final cut‑off times for creation and redemption as well as the allocation of responsibilities among the various stakeholders, including issuers, participating dealers, custodians and trustees. With respect to buy‑in considerations for ETPs, we emphasise that the existing ETP buy‑in exemption framework remains very important under T+1, particularly for market making and liquidity provision activities. Any proposal to tighten the exemption should be carefully assessed to avoid harming market liquidity. As for stock options, we agree that the settlement of equity transactions arising from exercise and assignment should be moved from T+2 to T+1. However, we remind brokers and clearing participants that they must process assignment instructions as soon as possible after the close of the market on T-day and ensure that sufficient securities inventory is available. Given that assignment instructions are only received after the market closes on T-day, standby securities borrowing and lending arrangements become critical, and the industry will need to initiate communication and confirmation for securities lending at an earlier stage.
Question 3： Do you have any comments that consequential amendments should be made to the Listing Rules to reflect the arrangements proposed under the T+1 operating model?
Our association broadly agrees with amending the Listing Rules to align with the T+1 operating model, including replacing all references to the “T+2 settlement system” with the “T+1 settlement system” and adjusting the ex‑date for ex‑entitlement trading to the last registration date. However, we remind HKEX that when amending the rules, it must ensure that there are adequate transitional arrangements for the market. In particular, listed companies and their share registrars will need time to adjust their internal corporate action timetables and systems. We recommend that HKEX provide detailed compliance guidance and illustrative timetables to listed companies and market participants at least six months before the rule amendments become effective, so as to avoid operational confusion arising from inconsistent interpretations.
Question 4： In assessing your circumstances for a T+1 transition, are there any other key topics, perspectives or types of market participants which you believe are relevant to highlight, that have not been covered in Exhibit 1 and paragraphs 110-113?
Our association considers that Appendix A already covers a number of important topics, but there are three further key areas that need to be emphasised. First, the bottleneck in the transmission of settlement instructions across the multi‑layer custody chain. At present, international institutional investors operate through a multi‑layer structure that includes global custodians, local sub‑custodians and brokers. Each layer independently generates and sends settlement instructions, and the risk of time loss and data inconsistency will be greatly magnified under T+1. Our association recommends that, in the industry guidance, HKEX explicitly encourage fund managers and custodians to send settlement instructions directly to CCASS, and to refer to the “Match‑to‑Instruct” model in the US market, compressing trade confirmation and settlement instruction generation into a single automated process. Second, the process for physical securities and investor settlement instructions at the retail level. Although the Consultation Paper suggests that pre‑funded retail investors will be less affected, in cases involving the deposit of physical securities or settlement through ISIs, retail investors must still go through multiple layers of banks or brokerages, and the paper‑based or semi‑electronic process often takes one business day or even longer. Under T+1, this directly threatens the ultimate performance of settlement obligations. Our association recommends that HKEX accelerate the alignment of the uncertificated securities market regime with the T+1 transition, and require brokerages to set earlier cut‑off times for client instructions. Third, the gap between the proposed workflow tool solution and existing operational practices. The centralised SSI repository and SI automation proposed in Exhibit 2 are worthy of support, but if market participants continue to rely on multi‑layer manual transmission, the effectiveness of these tools will be greatly reduced. Our association recommends that, in this consultation, HKEX further ask market participants whether they are willing to adopt an API model that directly connects to CCASS, and provide technical specifications and cost assessments for different connection methods.
Question 5： Do you consider the timeframe to be sufficient for you to prepare for T+1 to become effective in Q4 2027, given the advance visibility and lead time provided? Do you have any comments on the discussion and implementation approach?
Our association considers that the proposed implementation of T+1 in the fourth quarter of 2027, with a lead time of approximately 15 months from the publication of the detailed specifications, is an appropriate arrangement. This provides the market with a reasonable preparation window while also allowing alignment with major global markets, such as Europe, which plans to transition to T+1 in October 2027. However, we emphasise that whether 15 months is sufficient depends on HKEX’s proactive follow‑up and coordination efforts during this period, rather than relying solely on participants’ self‑declarations. HKEX must continuously assess the actual readiness progress of all types of industry service providers over these 15 months, including large and small‑sized brokerage firms, local and global custodians, system vendors, and retail service providers. Our association recommends that, as soon as possible after the conclusion of this consultation, HKEX publish detailed technical specifications and system interface standards, regularly issue readiness surveys to the market and hold progress update meetings, and conduct at least two rounds of market‑wide simulation tests covering both normal and stressed scenarios in early 2027. If certain categories of participants, such as small and medium‑sized brokerages, are found to be significantly unprepared, HKEX should consider providing targeted support, including technical guidance or process simplification recommendations, to ensure a smooth launch of T+1 in the fourth quarter of 2027 without compromising overall market stability and fairness.
Supplemental Question A：
Do you agree that the proposed workflow tool solution (as set out in Exhibit 2) would facilitate the implementation of a shortened settlement cycle under T+1?
Our association agrees that the proposed workflow tool solution set out in Exhibit 2, which includes a matching platform, a centralised SSI repository, SI automation and a dashboard for MIS, would facilitate the implementation of a shortened settlement cycle under T+1. For international institutional investors in particular, who operate with multi‑layer custody and agency arrangements, these tools can reduce instruction mismatches, improve early identification of potential settlement failures, and provide a higher level of automation in cross‑time‑zone operations. However, our association reiterates that the effectiveness of these tools depends on whether market participants are willing and able to connect directly to CCASS. If custodians and brokers continue to rely on multi‑layer manual transmission, the time lags and error risks at each manual layer will not be eliminated even with a centralised repository. Therefore, our association recommends that when introducing these tools, HKEX should also provide a mandatory timetable or strong market incentives to require the industry to phase out non‑standardised instruction methods such as fax or email, and should offer detailed technical support and cost assessments for different connection models (direct instruction model, drop copy model, approval model), so that all types of participants can choose the access path that suits their own operating model.
Supplemental Question B：
Would you consider adopting the following components described in the proposed streamlined workflow under Exhibit 2 to better prepare for the T+1 implementation?
• Matching
• Centralised SSI Repository
• SI Automation
• Dashboard for MIS
Our association would generally consider adopting the four components set out in Exhibit 2, namely matching, a centralised SSI repository, SI automation and a dashboard for MIS, but we have specific implementation recommendations and considerations for each. First, with respect to matching, we support the transition from manual processes to a centralised matching platform, but we emphasise that the platform must be capable of handling allocation and confirmation across multi‑layer custody relationships and allow different participants to upload and reconcile data at different times. Second, regarding the centralised SSI repository, we believe this is key to improving data quality, but it will be necessary to establish a rigorous SSI update and validation mechanism, including ownership, maker‑checker controls and audit trails, and to set a transition period during which all institutional participants are required to digitise their SSIs and upload them to the repository. Third, with respect to SI automation, we support the automatic transmission of simultaneous SIs to custodians and CCASS, but we remind HKEX that it must accommodate the different operating models and system maturity levels of various custodians, allowing them to choose direct instruction, drop copy or approval models, while also ensuring that automated processes operate reliably across time zones, for example during late night hours in Hong Kong, and include fallback manual handling mechanisms for exceptions. Fourth, regarding the dashboard for MIS, we consider real‑time settlement status updates and transparency of securities borrowing and lending recall notices to be critical to the success of T+1. The dashboard should enable clearing participants and custodians to see at a glance all outstanding settlement instructions, projected funding gaps and securities shortages, and provide drill‑down functionality to trace back to specific counterparties and clients. Overall, our association is willing to adopt these tools, provided that HKEX offers adequate technical support, a testing environment and flexible transitional arrangements, so that the industry has sufficient time to complete system integration and staff training before the fourth quarter of 2027.
In conclusion, the Association fully supports the move to a T+1 settlement cycle for the Hong Kong cash market and agrees with the overall direction and many pragmatic arrangements proposed by HKEX. However, the key to a successful transition lies in solving the efficiency bottlenecks in multi‑layered custody chains, brokers’ liquidity management, modernisation of retail physical settlement processes, and mandatory adoption of workflow tools. We call on HKEX, during the remaining preparation period, to actively coordinate with the industry, provide clear technical guidance, conduct comprehensive market testing, and give targeted support to participants of different sizes. Only then can Hong Kong implement T+1 smoothly in Q4 2027 and maintain its international competitiveness.
Should you have any queries regarding this letter, please feel free to contact our Council Member Mr. Eric Chia (Tel: / email: ) or the undersigned (tel: / email: ).
Yours sincerely,
[Signature] [Chop]
Mofiz Chan
Chairman
Hong Kong Securities & Futures Professionals Association