Hong Kong Exchanges and Clearing Limited (HKEx) will introduce a Block Trading Facility (BTF) on HKATS, the Hong Kong Futures Automated Trading System, on Monday, 29 October under a 6-month pilot programme.

Block trades comprise large buy and sell orders privately negotiated apart from the public auction market.

The BTF will extend HKExs services and benefits to the marketplace, including:

• Clearing House guarantees for transactions that may otherwise be executed over-the-counter;
• Price and execution certainty for large deals;
• Added liquidity; and
• Contract standardisation.

Main features of BTF are attached for reference.

Criteria for Block Trade

1. Applicable Markets

   The Block Trade Facility will be applicable to all products, contract months and strike series listed on the HKATS, except the Mini-HSI futures contract.

2. Trading Hours

   Block trades must be negotiated and registered through HKATS during the normal trading hours of the contracts. Block trading will be prohibited during the Pre-market Opening (PMO) session.

3. Minimum Volume Threshold

   The minimum number of contracts of each product eligible for block trading is set forth below:

   • Stock index futures - 100 contracts
   • Stock index options - 100 contracts
   • Stock futures - 100 contracts
   • Stock options - 100 contracts
   • Options on stock futures - 100 contracts
   • HIBOR futures - 400 contracts
   • HIBOR strips - 100 contracts
   • Rolling Forex - 50 contracts

4. Block Trade Days

   No Exchange Participant may execute a Block Trade on the last two trading days of an expiring contract.

5. Execution Price

   The price at which a block trade is executed may or may not be the prevailing market price, but must be at or within one of the following prices or price ranges:

   1. between whichever is the higher and whichever is the lower of:

      1. the highest traded price of the futures contract month or option series for the day up to the time the Block Trade is executed ("Highest Traded Price");

      2. the lowest traded price of the futures contract month or option series for the day up to the time the Block Trade is executed ("Lowest Traded Price");

      3. the prevailing bid price; and

      4. the prevailing ask price;

   2. at the traded price if only one traded price is available and no prevailing bid or ask price is available;

   3. at the prevailing bid price if only the prevailing bid price is available and no prevailing ask price or traded price is available;

   4. at the prevailing ask price if only the prevailing ask price is available and no prevailing bid price or traded price is available;

   5. at a fair and reasonable price if there is no Highest Traded Price, Lowest Traded Price, prevailing bid price or prevailing ask price.

   In connection with subsection (e), the determination of the Chief Executive as to whether a price is fair and reasonable shall be conclusive. The factors that the Chief Executive may take into consideration when determining whether a price is fair and reasonable include, but shall not be limited to, traded prices on previous days, traded prices and prevailing bid and ask prices of other futures contract months or option series of the same contract, the volatility and liquidity of the relevant Market, the size of the Block Trade order and general market conditions.

Information Dissemination

The price at which a Block Trade is executed will not be used in establishing the day-high, day-low, last traded price, Closing Quotation, or where applicable, the Final Settlement Price or Official Settlement Price of an Exchange Contract. The quantity of a Block Trade will be taken into account in the updating of the traded volume.

Market Surveillance

Each Exchange Participant shall have in place a telephone recording system to record all Block Trade orders received from and confirmation of executed Block Trades provided through the telephone. Each Exchange Participant shall ensure that such telephone recordings are maintained as part of its records for at least 3 months. Exchange Participants are required to observe Section 3.9 on Order Recording in the Code of Conduct for Persons Registered with the Securities and Futures Commission. Block trade activities between clients and Exchange Participants or two Exchange Participants shall be recorded and made available for checking on request. If necessary, the Exchange will require Participants to submit satisfactory evidence that Block Trades are executed in accordance with the Block Trade rules.

Notes:

Exchange Participant refers to Futures Exchange Participants, who can use the Block Trading Facility for stock index futures, stock index options, stock futures, options on stock futures, HIBOR futures, HIBOR strips and Rolling Forex, and Options Trading Exchange Participants, who can use the Block Trading Facility to trade stock options.

Chief Executive refers to the Chief Executive of the Futures Exchange for stock index futures, stock index options, stock futures, options on stock futures, HIBOR futures, HIBOR strips and Rolling Forex, and the Chief Executive of the Stock Exchange for stock options.