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Error Trade Handling Procedures

Exchange Participants that are original parties to a transaction on HKATS can file error trade claims to the Exchange if the trades are deviated from the established Error Trade Price Parameters.

Such claims shall be processed only in accordance with the following procedures:
  1. The claim must be made no later than 10 minutes after the trade is executed if it is a single leg futures or index options trade. In cases involving stock options trades or combination trades comprising index futures and/or index options, the claim has to be made within 30 minutes.

  2. After receiving a claim, HKEX will immediately broadcast an alert on the derivatives market's trading system about the claim and the possible cancellation of the trade.

  3. If the parties to the trade agree within 10 minutes after the alert is broadcast that it is an error trade, and if HKEX receives no objections from Exchange Participants within the same 10-minute period, the trade will be cancelled.

  4. If within 10 minutes after the alert is broadcast, the parties to the trade do not agree to its cancellation, if HKEX receives objections from Exchange Participants or if not all parties to the trade can be contacted, a special HKATS Error Trade Review Panel, comprised of members of HKEX's staff, will be convened immediately to review the claim and decide within 10 minutes (unless this is impractical) whether or not the trade will be cancelled.

  5. In reaching its decision, the panel may consider all facts, including market conditions before, during, and after the transaction. Decisions by the panel are binding on all parties to the trade and will be broadcast on all HKATS workstations as soon as they are made. The panel's decisions are final.

  6. Exchange Participants are required to pay a fee of $3,000 for each error trade claim.

For details, please refer to HKFE Rule 819B under Rules of the Futures Exchange for Futures & Index Options and Options Trading Rule 540 under Options Trading Rules of the Stock Exchange for Stock Options.

 

Error trade price parameters

Futures & Index Options
Contract From Notation Price
Stock Index Futures
3%
Dividend Futures
15%
HSI Volatility Index Futures
20%
Stock Futures
5%
CES China 120 Index Futures
3%
London Aluminium Mini Futures
3%
London Zinc Mini Futures
3%
London Copper Mini Futures
3%
London Nickel Mini Futures
3%
London Tin Mini Futures
3%
London Lead Mini Futures
3%
USD Gold Futures
3%
CNH Gold Futures
3%
Iron Ore Futures  4%
HIBOR Futures
25 basis points
Stock Index Options
i)    if notation price ≥ 300 index points
ii)   if notation price < 300 index points

10%
30 index points

Note:

  1. The notation price for futures contracts in the above table (except for Iron Ore Futures, USD and CNH Gold Futures) shall be obtained in the following order

    1. last traded price within 5 minutes prior to the Error Trade

    2. the mid-point of the best bid/ask price immediately prior to the Error Trade;

    3. last settlement price; or

    4. the difference of notation prices between the related outright contracts (calendar spread only).

  2. The notation price of USD and CNH Gold Futures, as well as Iron Ore Futures will be determined as follows:

    1. The average of the prices of the previous match and the next match in that contract month occurring reasonably close to the time of error trade. If this, in the opinion of the Exchange, fails to reflect a fair price, the notation price will be determined on the basis of item 2 below.

    2. The reasonable bid and offer prices available around the time of error trade. If this, in the opinion of the Exchange, fails to reflect a fair price, the notation price will be determined on the basis of item 3 below.

    3. The prices obtained by the Exchange from consulting up to 3 independent market practitioners who have no interest in the trade in order to arrive at a valid notation price. Notwithstanding the foregoing, the Exchange shall have absolute discretion in determining the notation price.

  3. Determination of the notation price of the Stock Index Option Contracts will be based on the followings:

    1. The average of the prices of the previous match and the next match in that option series occurring reasonably close to the time of error trade. If this average price fails to reflect a fair price, the notation price will be determined on the basis of item (ii) below.

    2. The reasonable bid and offer prices available around the time of error trade, unless in the sole discretion of the Exchange, this fails to reflect a fair price, in which case the Exchange may consult up to 3 independent market practitioners who have no interest in the trade in order to arrive at a valid notation price.

    Notwithstanding the foregoing, the Exchange shall have absolute discretion in determining the Reference Price.

4. Notwithstanding the above, the Chief Executive of HKFE or his designee may adopt such other price to be the notation price as he considers appropriate, taking into account the market conditions prevailing at the time of the Error Trade.

Stock Options

  1. The difference between the trade price and Reference Price is such that it exceeds 3 percent of the nominal price of the underlying security (as defined in the Exchanges Rules) at the time the trade occurred; or
  2. The difference between the trade price and the Reference Price is such that it exceeds 2 times the maximum spread permitted under Market Maker Obligations more particularly prescribed in the Second Schedule of the Options Trading Rules for the option series, and the difference represents at least 30 percent of the Reference Price.

Determination of the Reference Price will be based on the average of the prices of the previous match and the next match occurring that trading day in that option series unless in the sole discretion of the Exchange, this fails to reflect a fair price, in which case the Exchange may consult up to 3 independent options market practitioners who have no interest in the trade in order to arrive at a valid Reference Price. Notwithstanding the foregoing, the Exchange shall have absolute discretion in determining the Reference Price.

 

BRICS & RMB Currency Futures 

Contract
From Notation Price
BRICS Futures
5%
RMB Currency Futures
1%

Note:

The notation price will be determined as follows:

  1. The average of the prices of the previous match and the next match in that contract month occurring reasonably close to the time of error trade. If this, in the opinion of the Exchange, fails to reflect a fair price, the notation price will be determined on the basis of item (2) below.

  2. The reasonable bid and offer prices available around the time of error trade. If this, in the opinion of the Exchange, fails to reflect a fair price, the notation price will be determined on the basis of item (3) below.

  3. The prices obtained by the Exchange from consulting up to 3 independent market practitioners who have no interest in the trade in order to arrive at a valid notation price.

Notwithstanding the foregoing, the Exchange shall have absolute discretion in determining the notation price.

RMB Currency Options

Contract

From Notation Price

RMB Currency Options  -  USD/CNH Options
i)    if notation price ≥ 0.4000
ii)   if notation price < 0.4000

10%
0.0400

Note:

The notation price of the RMB Currency Options - USD/CNH Options Contracts will be based on the followings:

  1. The average of the prices of the previous match and the next match in that option series occurring reasonably close to the time of error trade. If this average price fails to reflect a fair price, the notation price will be determined on the basis of item (ii) below.

  2. The reasonable bid and offer prices available around the time of error trade, unless in the sole discretion of the Exchange, this fails to reflect a fair price, in which case the Exchange may consult up to 3 independent market practitioners who have no interest in the trade in order to arrive at a valid notation price.

Notwithstanding the foregoing, the Exchange shall have absolute discretion in determining the notation price.

Notwithstanding the above, the Chief Executive of HKFE or his designee may adopt such other price to be the notation price as he considers appropriate, taking into account the market conditions prevailing at the time of the Error Trade.

MOF T-Bond Futures 

Contract From Notation Price
Five-Year MOF T-Bond Futures 3%

Note:
The notation price will be determined as follows:
1. The average of the prices of the previous match and the next match in that contract month occurring reasonably close to the time of error trade. If this, in the opinion of the Exchange, fails to reflect a fair price, the notation price will be determined on the basis of item (2) below.
2. The reasonable bid and offer prices available around the time of error trade. If this, in the opinion of the Exchange, fails to reflect a fair price, the notation price will be determined on the basis of item (3) below.
3. The prices obtained by the Exchange from consulting up to 3 independent market practitioners who have no interest in the trade in order to arrive at a valid notation price.

Notwithstanding the foregoing, the Exchange shall have absolute discretion in determining the notation price.

Tailor-Made Combination

The trade price of the Tailor-Made Combination trade is such that it exceeds whichever is the greater of:

  1. 30 ticks from the Notation/Reference Price of the Tailor-Made Combination trade concerned; or

  2. 10 percent from the Notation/Reference Price of the Tailor-Made Combination trade concerned.

For the purpose of determining a Notation/Reference Price:

  1. The Exchange shall base on the average of the prices of the previous match and the next match occurring that trading day in that Tailor-Made Combination trades or if this fails to reflect a fair price or such prices are not available, the Exchange may consult up to 3 independent market practitioners who have no interest in the trade to arrive at a valid Notation/Reference Price; or

  2. If the market practitioners cannot provide a fair price of the Tailor-Made Combination trades concerned, the Exchange shall obtain the Notation/Reference Price* of each individual leg consisted of the Tailor-Made Combination trades in accordance with the Error Trades Rules for the respective HKFE product or Stock Options executed through the Central Order book, then the Exchange shall calculate the fair price of the Tailor-Made Combination trades concerned

Parameters may be revised by HKEX in which case Participants will be notified before the change takes effect.

* Notation Price refers to Futures & Index Options while Reference Price refers to Stock Options.

For details, please refer to HKFE Rule 819B under Rules of the Futures Exchange for Futures & Index Options and Options Trading Rule 540 under Options Trading Rules of the Stock Exchange for Stock Options.


Updated 03 Aug 2017

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