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HKEX to Launch Enhanced Pre-Opening Session for its Securities Market, and new ETP Listing-day POS Price Limit

Market Operations
05 Oct 2020

Hong Kong Exchanges and Clearing Limited (HKEX) today (Monday) announced that it will launch a range of enhancements to the Pre-Opening Session (POS) in its securities market, effective Monday, 19 October 2020.

The POS is a 30-minute opening auction that takes place before the Hong Kong securities market opens each morning.  It helps to determine a fair opening price for each POS security, by aggregating buying and selling interests, and then executing trades at a single price, where maximum volume can be traded.  The session also helps to absorb the impact from market moving overnight news and events, by facilitating an orderly and smooth price discovery process.

The enhancements to POS involve adopting relevant auction features from the more-established Closing Auction Session (CAS) and applying features specifically relevant to market opening, with the aim of further improving price discovery and trading liquidity.

“The rollout of the Pre-Opening Session enhancements marks another important milestone as HKEX continues to improve its market microstructure for the benefit of all market participants," said HKEX Head of Markets Wilfred Yiu. "The enhancement which fully align with international best practices, will help improve price discovery and enhance liquidity. We look forward to welcoming more investors to the POS and to further building the depth and efficiency of Asia’s most liquid and vibrant financial market.”

Key areas of enhancement, to be introduced following the conclusion of a market consultation in December 2019, include:  

  • Introduction of a two-stage price limit to curb excessive price movements during the POS, the first-stage price limit will be ±15 per cent against the security’s POS reference price;
  • Securities coverage adjusted to align with CAS;
  • Addition of randomised auction matching;
  • Allow at-auction limit orders throughout the session;
  • Allow shortselling orders with a price not lower than the POS reference price; and
  • Enhanced market transparency through more market data disclosures.

In addition, HKEX will launch a feature during POS for Exchange Traded Funds and Leveraged & Inverse Products (collectively Exchange Traded Products (ETPs)) on their listing day.  As an ETP’s trading price should not deviate significantly from its net asset value (NAV) per unit, the new feature will apply a ±15 per cent first-stage price limit during the POS to ETPs on their listing day1. The ETP’s pre-IPO NAV per unit will be used as the POS reference price for price validation.  For the avoidance of doubt, no first-stage price limit will be applied to other securities’ first day of trading.

Further details of the enhanced POS are available on the POS Enhancements web corner on HKEX website.

Note:

  1. In HKEX’s original plan, the ±15% first-stage price limit will not be applicable to securities including ETPs on their listing day.

  

About HKEX

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.

www.hkexgroup.com

 

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Updated 05 Oct 2020