Hong Kong Exchanges and Clearing Limited (HKEx) aims to suspend the Closing Auction Session (CAS) in its securities market from Monday, 23 March 2009 subject to the approval of the necessary rule amendments by the Securities and Futures Commission (SFC) and market readiness. The decision was made due to HKEx’s concerns about any appearance of abuse during the CAS and the need to maintain public confidence in the orderliness, fairness and transparency of the market in light of recent price volatility during the CAS.
Under the proposal, the securities market will close at 4 pm and HKEx will use its pre-CAS method for calculating closing prices for securities (ie based on the median of five snapshot nominal prices taken during the last minute prior to the end of the market’s Afternoon Session) from 23 March 2009; and trading of stock index futures and options in the derivatives market will end at 4:15 pm from 23 March 2009. This will effectively bring the securities and derivatives markets back to the trading arrangements before the CAS was introduced in the securities market on 26 May 2008. Trading of stock options and futures will remain unchanged and close at 4:00pm.
For the securities market, HKEx will offer a series of free end-to-end test sessions on 13 March and from 16 to 20 March 2009 to all Exchange Participants (EPs) with Broker Supplied Systems and testing lines in place. Two market rehearsals will also be provided this Saturday (14 March 2009) and next Saturday (21 March 2009) to help EPs, information vendors and other market users prepare for the proposed changes.
For the derivatives market, free test sessions for OAPI, OMnet Application Programming Interface, will similarly be provided to EPs with testing lines on 13 March and from 16 to 20 March 2009. Two market rehearsals will also be arranged this Saturday (14 March 2009) and next Saturday (21 March 2009) alongside that of the securities market. Technical details for the testing will be issued separately to all relevant market users.
As a result of the proposed suspension, CAS changes scheduled to take effect from 22 June 2009 have been cancelled.
Meanwhile, HKEx will continue to explore possible alternative CAS arrangements, including improvements to the 2 per cent price control mechanism, in view of the recent price volatility during the CAS. Any future proposals concerning the CAS will be put forward for public consultation before implementation.
As always, HKEx considers maintaining public confidence in the orderliness, fairness and transparency of the market is of paramount importance.
HKEx will continue to monitor closely the trading activities during the CAS prior to 23 March 2009 and will refer cases of unusual market activities to the SFC for investigation. HKEx will continue to provide full support to the SFC in regard to all its investigations.