Published On: Sat, Sep 18th, 2010

HKEx Invites Views on Proposed Changes to Trading Hours

Hong Kong Exchanges and Clearing Limited (HKEx) published a consultation paper today (Friday) on proposed changes to the trading hours of its securities and derivatives markets1.

HKEx proposes to change its trading hours for two strategic reasons:

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To enhance its price discovery function for Mainland-related securities by opening earlier and increasing the overlap of its trading hours with the Mainland’s; and

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To strengthen its competitiveness by narrowing the gap between its opening times and those of its competitors in the region.

The paper seeks views on proposed changes as illustrated in Figure 1:

1. Advancing the start of morning trading by half an hour; and

Trading in the securities, stock futures and stock options markets would open at 9:30 am and close at 12:00 noon, and trading in the index futures and index options markets would open at 9:15 am and close at 12:00 noon.

2. Advancing the start of afternoon trading.

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Option 1: trading in the securities and derivatives markets would open at 1:00 pm, resulting in a one-hour lunch break from 12:00 noon to 1:00 pm.

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Option 2: trading in the securities and derivatives markets would open at 1:30 pm, resulting in a one-and-a-half-hour lunch break from 12:00 noon to 1:30 pm.

The pre-opening session2 in the securities market would continue to begin 30 minutes before the start of morning trading, and the pre-market opening periods3 in the Hang Seng Index, Mini-Hang Seng Index and H-shares Index futures markets would continue to begin 30 minutes before the start of morning and afternoon trading. HKEx welcomes views on shortening or eliminating the pre-opening session and the pre-market opening periods in connection with any changes to trading hours.

HKEx has not proposed any changes to the closing times of its securities and derivatives markets.

Although Hong Kong is the international financial centre of China and its financial markets have close ties with their Mainland counterparts, the opening times of HKEx’s securities and derivatives markets lag behind the Mainland’s by half an hour in the morning and one-and-a-half hours in the afternoon. As such, Hong Kong investors can only react to market news after their counterparts in the Mainland market, which may compromise the Hong Kong markets’ price discovery function, particularly at a time where there are increasing numbers of products listed in both Hong Kong and the Mainland.

“As part of our overall strategic plan to enhance our global and regional competitiveness, we are proposing changes to our trading hours to enhance our price discovery function for Mainland-related securities and to maximise the overlap of our trading hours, reflecting the growing interconnections between the Hong Kong and Mainland markets.” said Charles Li, HKEx’s Chief Executive.

The consultation paper and the questionnaire can be downloaded from the HKEx website.

The consultation period ends on 29 October 2010.

Notes:
1 Derivatives market refers to HKEx’s stock futures, stock options, index futures and index options markets.
2 The pre-opening session determines a fair opening price of each security and reduces the loading of the trading system at the start of morning trading.
3 The pre-market opening periods serve to establish orderly market opens in the morning and afternoon. Hang Seng Index Futures, Mini-Hang Seng Index Futures and H-shares Index Futures have the pre-market opening periods.

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