Source: HKEX

HKEX (Hong Kong Exchanges and Clearing Limited) published a consultation summary today (Tuesday, December 17) on the proposed reduction of the minimum price fluctuation for Stocks in the Hong Kong securities market.

HKEX has received 110 non-repetitive responses from a wide range of market participants. The consultation suggestion to lower the minimum tick size for Stocks, Real Estate Investment Trusts (REITs), and Other applicable securities (excluding Exchange Traded Products (ETP), Bonds, Exchange Traded Options (ETO), and structured products) was supported by a majority of respondents, and the support for the suggestion also represented the majority of trading volume in the spot market.

After careful consideration of market participants' responses, HKEX has decided to proceed as planned and lower the minimum price fluctuation limits for applicable securities in two phases. To ensure that the market has ample time to prepare, the first phase will be implemented in mid-2025; after reviewing the implementation of the first phase, the second phase is expected to be launched in mid-2026.

Yao Jia Ren, Vice President, Co-Chief Operating Officer, and Co-Head of Markets of HKEX Group, said: "HKEX is committed to enhancing the vitality and liquidity of the Hong Kong market through various market microstructure improvement measures. We are pleased to take an important step forward in the reform to lower the minimum tick size, which reduces the overall trading costs in the market and improves the efficiency of the price discovery process. Thank you to every stakeholder who actively responded; these valuable opinions help us consolidate the long-term competitiveness and attractiveness of the Hong Kong market."

The minimum price fluctuation is the smallest price change unit for securities traded on the Exchange, determining the minimum allowable bid-ask spread for a trade, and lowering the minimum price fluctuation may allow each trade to be split into multiple smaller trades.

To ensure the successful implementation of measures to narrow the bid-ask spread and keep the market's trading costs comparable to current levels, HKEX plans to revise the share settlement fee structure by removing the current minimum and maximum settlement fee limits and adjusting the fee rates. The new fee structure will be fairer and clearer, while also ensuring that the overall market expenses will not increase as a result. The Securities and Futures Commission is currently reviewing the new arrangement, with further details to be announced in due course after obtaining regulatory approval.

While lowering the minimum bid-ask spread, HKEX will also revise the limit price for input of buy and sell orders and make temporary adjustments to the market maker's obligations for the related stock options contracts, aiming to facilitate investors in placing orders more flexibly after the spread narrows.

The consultation summary and the opinions received have been posted on the HKEX website. HKEX will announce the specific effective dates for the first and second phases in due course, depending on market readiness.

Editor/Jeffy