Primary Market Maker Program 
30/06/2017 
 

There are three types of market makers in HKEX's options market:
- Primary Market Maker (PMM);
- Market maker providing continuous quotes (CQMM); and
- Market maker responding to quote request (QRMM).

PMM is available to Hang Seng Index (HSI) Options, Hang Seng China Enterprises Index (HHI) Options and selected stock options classes. PMM is required to provide continuous quotes (CQ) and also responds to quote requests (QR). A maximum of 5 PMM permits will be granted for each option product with applicants selected through bidding process. The selection is primarily based on the applicant's obligation commitment and past market making quality.

HSI and HHI Options PMM Program for the period of November 2016 and December 2017

HSI and HHI Options PMM is required to:

       provide CQ in not less than 100 option series (See Table 1A for details); and

       respond to at least 70% of QR issued for all short-dated expiry months (See Table 1B for details)

Obligations in terms of quote size, bid/ask spread and the percentage of trading hours to provide CQ are determined through bidding process. (See Table 1C).

For the list of HSI and HHI options PMM, please refer to:

http://www.hkex.com.hk/eng/prod/drprod/hkifo/RTlist_equityindex.htm

Obligations

Table 1A -  CQ Obligations

Assigned CQ series

100 series

CQ series selection pool:

Contract Month

Moneyness

Call

Put

Spot month

Nearest OTM

10

10

Nearest ITM

2

2

2nd calendar month

Nearest OTM

10

10

Nearest ITM

2

2

3rd calendar month

Nearest OTM

10

10

Nearest ITM

2

2

4th calendar month

Nearest OTM

10

10

Nearest ITM

2

2

1st quarter

Nearest OTM

10

10

Nearest ITM

2

2

2nd quarter

Nearest OTM

10

10

Nearest ITM

2

2

3rd quarter

Nearest OTM

10

10

Nearest ITM

2

2

Sub-total

84

84

Total

168

Min. Quote Size

Determined by bidding (See Table 1C)

Max. Bid/Ask Spread

Min. Trading Hours

Table 1B -  QR Obligations

Min. Respond to QR Requirement 70% of QR

Min. Quote Size

Determined by bidding (See Table 1C)

Max. Bid/Ask Spread

Max. Time Limit for Responding to QR

20 secs

Min. Display Time

20 secs

 Table 1C – Obligations determined by bidding (Level 1)

Level 1

Min Quote Size

Spot, 2nd , 3rd, 4th calendar

3

1st, 2nd, 3rd quarter

1

Max Bid/ Ask Spread



(BUS = Best Underlying Spread)

Spot, 2nd, 3rd, 4th calendar

1-750 points

Max (60 points, 20% of bid)

> 750 points

150 points

1st, 2nd  quarter

1-750 points

Max (70 points, 30% of bid)

> 750 points

225 points

3rd quarter

1-750 points

Max (80 points, 45% of bid)

> 750 points

340 points

Min. CQ Trading Hours

80%

  

Incentives 

1.  Upon fulfillment of obligations, PMM will pay:

(i)   a discounted trading fee for each HSI Options and HHI Options contract traded by PMM:  

Product

Standard

CQMM

QRMM

PMM

HSI Options

HK$ 10.00

HK$ 2.00

HHI Options

HK$ 3.50

HK$ 0.50

(ii)  a discounted trading fee on transactions effected in other Stock Index Futures and Stock Index Options products with the  same underlying index, provided that the number of contracts that are eligible for a discounted trading fee in any calendar month should not exceed the volume of the HSI Options or HHI Options traded by the PMM in that calendar month (adjusted to equivalent contract size in the respective products). For details, please refer to the Chapter 3 of Trading Procedures for Stock Index Futures and Stock Index Options of the HKFE Rules.

2.   PMM may apply to the Exchange for a waiver of the monthly sub-license fee for up to 16 OMnet Application Programming Interface (OAPI) connections (i.e. $2,600 per month per connection or equivalent) to HKATS for HSI Options PMM and up to 8 OAPI connections to HKATS for HHI Options PMM.

3.   PMM may apply to the Exchange for additional throughput with mass quote (MQ) function and Market Maker Protection function:

Transaction per second (TPS) with MQ:

1 TPS with MQ for every 3 assigned CQ series

OAPI connection setting for TPS with MQ:

PMM may select any combination of 5, 10, 20 or 50 TPS per OAPI connection with MQ

Market Maker Protection:

Provided in respect of options in respect of which the PMM is acting in its capacity as such

 

Stock Options PMM Program for the period of 3 July 2017 to 29 June 2018

  Stock Options PMM is required to:

       provide CQ in not less than 150 option series (See Table 2A for details); and

       respond to at least 80% of QR issued for all expiry months (See Table 2B for details)

Obligations in terms of quote size, bid/ask spread and the percentage of trading hours to provide CQ are determined through bidding process. (See Table 2C).

For the list of stock options PMM, please refer to: 

http://www.hkex.com.hk/eng/prod/drprod/hkifo/RTlist_stockoptions.htm

Obligations 

Table 2A - CQ Obligations

Assigned CQ series

150 series

CQ series selection pool:

Contract Month

Series

Call

Put

Spot month

Nearest OTM

10

10

Nearest ITM

2

2

2nd Calendar month

Nearest OTM

10

10

Nearest ITM

2

2

3rd Calendar month

Nearest OTM

10

10

Nearest ITM

2

2

4th Calendar month

Nearest OTM

10

10

Nearest ITM

2

2

1st Quarter month

Nearest OTM

10

10

Nearest ITM

2

2

2nd Quarter month

Nearest OTM

10

10

Nearest ITM

2

2

3rd Quarter month

Nearest OTM

10

10

Nearest ITM

2

2

Sub-total

84

84

Total

168

Min Quote Size

Determined by bidding (See Table 2C)

Max. bid/ask spread
Mini CQ on Trading hours

  Table 2B - QR Obligations

Min Respond to QR Requirement 80% of QR

Min Quote Size

Determined by bidding (See Table 2C)

Max Bid/Ask Spread

Max Time Limit for Responding to QR

20 seconds

Min Display Time

20 seconds

 Table 2C – Obligations determined by bidding (Level 1)

 Underlying Stock Name

SEHK Code

HKATS Code

Min Quote Size

Spread Group

(see table below)

Min. CQ Trading Hours %

First 4 calendar months

Next 3 quarter months

Agricultural Bank of China Limited *

1288

XAB

30

15

A

80%

AIA Group Limited

1299

AIA

30

15

A

80%

Bank of China Limited *

3988

XBC

30

15

A

80%

China Construction Bank Corporation *

939

XCC

30

15

A

80%

China Life Insurance Company Limited

2628

CLI

30

15

A

80%

China Mobile Limited

941

CHT

30

15

A

80%

China Petroleum & Chemical Corporation

386

CPC

30

15

A

80%

CNOOC Limited

883

CNC

30

15

A

80%

CSOP FTSE China A50 ETF

2822

CSA

30

15

A

80%

Galaxy Entertainment Group Limited

27

GLX

30

15

A

80%

Hong Kong Exchanges and Clearing Limited

388

HEX

30

15

B

80%

HSBC Holdings Plc.

5

HKB

30

15

A

80%

Industrial and Commercial Bank of China Limited *

1398

XIC

30

15

A

80%

iShares FTSE A50 China Index ETF

2823

A50

30

15

A

80%

PetroChina Company Limited

857

PEC

30

15

A

80%

Ping An Insurance (Group) Company of China, Ltd.

2318

PAI

30

15

A

80%

Sands China Ltd.

1928

SAN

30

15

A

80%

Tencent Holdings Limited

700

TCH

30

15

B

80%

*Option class with minimum price fluctuation of HK$0.001.

Table 2D – Maximum Bid/Offer Spread Obligation (Level 1 Obligation)

Spread Group

Contract Month

Max. Bid/Offer Spread

A

Spot month

3 Business Days to expiry

20% of the bid price of the quote or 4 times the best underlying spread, whichever is the lower

≥ 4 Business Days to expiry

10% of the bid price of the quote or 4 times the best underlying spread, whichever is the lower

The next 3 calendar expiry months

The next 2 calendar quarter expiry months

20% of the bid price of the quote or 6 times the best underlying spread, whichever is the lower 

The 3rd calendar quarter expiry month

20% of the bid price of the quote or 12 times the best underlying spread, whichever is the lower 

B

Spot month

3 Business Days to expiry

35% of the bid price of the quote or 9 times the best underlying spread, whichever is the lower

≥ 4 Business Days to expiry

20% of the bid price of the quote or 9 times the best underlying spread, whichever is the lower

The next 3 calendar expiry months

The next 2 calendar quarter expiry months

35% of the bid price of the quote or 12 times the best underlying spread, whichever is the lower 

The 3rd calendar quarter expiry month

45% of the bid price of the quote or 21 times the best underlying spread, whichever is the lower

Note: Notwithstanding the above, the Exchange may review the spread group (Group A or B) of each option class on
monthly basis to reflect the change in the market conditions.  

In addition,  for option classes with min. price fluctuation of HK$0.01, PMM will not be obliged to quote a spread narrower
than the followings: 

Spread Group

Underlying Stock Price

PMM Not Obliged to Quote Narrower than

A

< $100

Best bid/offer spread of underlying security + 5 minimum price fluctuation

>= $100

Best bid/offer spread of underlying security + 10 minimum price fluctuation

B

< $100

Best bid/offer spread of underlying security + 15 minimum price fluctuation

>= $100

Best bid/offer spread of underlying security + 30 minimum price fluctuation

 For option classes with minimum price fluctuation of HK$0.001, PMM will not be obliged to quote a spread narrower
than $0.03. 

In addition, PMM will not be obliged to quote for the bid side in response to a QR for a far out-of-the-money Contract
which has a value near zero.  A PMM shall remain obliged to quote for the sell side by issuing a sell limit order with
a limit price no greater than 10 and 30 minimum price fluctuations in option classes with minimum price fluctuations
of HK$0.01 and HK$0.001 respectively within the required response time and for the minimum required quantity and duration.
  

Incentives 

1.     Upon fulfillment of obligations, PMM will pay a discounted trading fee for each options contracts traded by PMM:

Stock Options Tier

Standard

CQMM / QRMM

PMM

1

HK$3.00

HK$1.50

HK$1.20

2

HK$1.00

HK$0.80

HK$0.60

3

HK$0.50

HK$0.40

HK$0.30


2. 
PMM may apply to the Exchange for a waiver of the monthly sub-license fee for up to 2 OAPI connections (i.e. $2,600 
     per month per connection or equivalent) to HKATS for each option class.

3.   PMM may apply to the Exchange for additional throughput with mass quote (MQ) function and Market Maker Protection
      function:

Transaction per second (TPS) with MQ: 1 TPS with MQ fo every 3 assigned CQ series

OAPI connection setting for TPS with MQ:

PMM may select any combination of 5, 10, 20 or 50 TPS per OAPI connection with MQ

Market Maker Protection:

Provided in respect of options in respect of which the PMM is acting in its capacity as such

4.  For each option class, PMM shall entitle to a wavier of one-off fee for applying for an increase in the Central Gateway throughput rate by one standard Central Gateway throttle rate.