Starting May 11, HKEx will implement the first stage of adjustments to optimize the “Market Volatility Control Mechanism” (“Market Adjustment Mechanism”).

The first stage optimization measures of the Hong Kong Stock Exchange this time mainly include expanding the range of stocks covered by the market adjustment mechanism from the Hang Seng Index and the Hang Seng China Enterprises Index (78 stocks in total) to include the constituent stocks of the Hang Seng Composite Large, Medium and Small Cap Index (a total of nearly 500 stocks); furthermore, the starting limits for the three constituent stocks of the Hang Seng Composite Index are divided into three tiers, set at ± 10%, ± 15%, and ± 20% of the last transaction price five minutes ago, respectively.

The market regulation mechanism is known as the Hong Kong version of the “fusion mechanism”. That is, when securities or futures prices skyrocket or fall in a short period of time, it interferes with market transactions through a pre-set mechanism to mitigate large price fluctuations.

However, unlike the US stock fusion mechanism, the Hong Kong stock market regulation mechanism targets individual stocks rather than indices, and does not force listed companies to suspend market transactions. In addition, the market regulation mechanism will allow a “cooling-off period” in the morning and afternoon of each trading day. Shares that trigger the mechanism can only be traded within a limited price range during the “cooling-off period”.