Hong Kong Exchanges and Clearing Limited (HKEX) is pleased to announce that it will implement the first phase enhancements of the Volatility Control Mechanism (VCM) on 11 May 2020.
HKEX's VCM is designed to prevent extreme price volatility among individual stocks and was first introduced to the securities market in August 2016.
HKEX proposed the VCM enhancements in a consultation paper in 2019. This followed guidance issued by the International Organisation of Securities Commissions asking regulated markets to review and adjust their volatility controls to ensure that they stay relevant with respect to the latest market developments.
"The enhancement will further strengthen our stock-level safeguards during extreme price volatility, and reflect changes in international practice and regulatory guidance," said HKEX’s Head of Markets Wilfred Yiu.
HKEX proceeded with implementation of the first phase of VCM enhancements after concluding that there was substantial market support for its proposal based on the consultation feedback.
The first phase of VCM enhancements include:
- Expanding VCM stock coverage from constituent stocks of the Hang Seng Index and Hang Seng China Enterprises Index (total number of stocks at 781) to constituent stocks of Hang Seng Composite LargeCap, MidCap and SmallCap Indexes (total of nearly 5002 stocks); and
- Applying a tiered structure of triggering thresholds at ±10 per cent, ±15 per cent, and ±20 per cent to the last traded price five minutes ago respectively for the constituent stocks of the three Hang Seng Composite Indexes.
Six months after the implementation of the first phase enhancements, HKEX will conduct a review on market operations before implementing the second phase enhancement, which will allow multiple triggers per stock per trading session.
HKEX has also rolled out a set of market education materials, which include educational videos and infographics on VCM enhancements. Further details of the VCM can be found on the HKEX website.
- Data as of 31 March 2020
- Data as of 31 March 2020
Hong Kong Exchanges and Clearing Limited (HKEX) is one of the world’s major exchange groups, and operates a range of equity, commodity, fixed income and currency markets. HKEX is the world’s leading IPO market and as Hong Kong’s only securities and derivatives exchange and sole operator of its clearing houses, it is uniquely placed to offer regional and international investors access to Asia’s most vibrant markets.
HKEX is also the global leader in metals trading, through its wholly owned subsidiaries, The London Metal Exchange (LME) and LME Clear Limited. This commodity franchise was further enhanced with the launch of Qianhai Mercantile Exchange (QME), in China, in 2018.
HKEX launched the pioneering Shanghai-Hong Kong Stock Connect programme in 2014, further expanded with the launch of Shenzhen Connect in 2016, and the launch of Bond Connect in 2017.