There are three types of market makers in HKEX's options market:
- Primary Market Maker (PMM);
- Market maker providing continuous quotes (CQMM); and
- Market maker responding to quote request (QRMM).
PMM is available to Hang Seng Index (HSI) Options, Hang Seng China Enterprises Index (HHI) Options and selected stock options classes. PMM is required to provide continuous quotes (CQ) and also responds to quote requests (QR).
HSI and HHI Options PMM Program
HSI and HHI Options PMM is required to:
• provide CQ in not less than 100 option series (See Table 1A for details); and
• respond to at least 70% of QR issued for all short-dated expiry months (See Table 1B for details)
Obligations in terms of quote size, bid/ask spread and the percentage of trading hours to provide CQ are pre-determined. (See Table 1C).
For the list of HSI and HHI options PMM, please refer to:
http://www.hkex.com.hk/eng/prod/drprod/hkifo/RTlist_equityindex.htm
Obligations
Table 1A - CQ Obligations
|
Assigned CQ series |
100 series |
|
CQ series selection pool: |
|
|
Contract Month |
Moneyness |
Call |
Put |
|
Spot month |
Nearest OTM |
15 |
15 |
|
Nearest ITM |
2 |
2 |
|
2nd calendar month |
Nearest OTM |
15 |
15 |
|
Nearest ITM |
2 |
2 |
|
3rd calendar month |
Nearest OTM |
15 |
15 |
|
Nearest ITM |
2 |
2 |
|
4th calendar month |
Nearest OTM |
15 |
15 |
|
Nearest ITM |
2 |
2 |
|
1st quarter |
Nearest OTM |
15 |
15 |
|
Nearest ITM |
2 |
2 |
|
2nd quarter |
Nearest OTM |
15 |
15 |
|
Nearest ITM |
2 |
2 |
|
3rd quarter |
Nearest OTM |
15 |
15 |
|
Nearest ITM |
2 |
2 |
|
Sub-total |
119 |
119 |
|
Total |
238 |
|
Min. Trading Hours |
90% of trading hours in T Session in a month |
Table 1B - QR Obligations
Table 1C – Obligations determined by bidding
|
|
Level 1 |
|
Min Quote Size |
Spot, 2nd , 3rd, 4th calendar |
7 |
|
1st, 2nd, 3rd quarter |
5 |
Max Bid/ Ask Spread
|
Spot, 2nd, 3rd, 4th calendar |
1-750 points |
Max (30 points, 10% of bid) |
|
> 750 points |
75 points |
|
1st, 2nd quarter |
1-750 points |
Max (40 points, 15% of bid) |
|
> 750 points |
115 points |
|
3rd quarter |
1-750 points |
Max (50 points, 20% of bid) |
|
> 750 points |
150 points |
|
Min. CQ Trading Hours |
90% |
Incentives
1. Upon fulfillment of obligations, PMM will pay:
(i) a discounted trading fee for each HSI Options and HHI Options contract traded by PMM:
|
HSI Options |
HK$ 10.00 |
HK$ 2.00 |
|
HHI Options |
HK$ 3.50 |
HK$ 0.50 |
(ii) a discounted trading fee on transactions effected in other Stock Index Futures and Stock Index Options products with the same underlying index, provided that the number of contracts that are eligible for a discounted trading fee in any calendar month should not exceed the volume of the HSI Options or HHI Options traded by the PMM in that calendar month (adjusted to equivalent contract size in the respective products). For details, please refer to the Chapter 3 of Trading Procedures for Stock Index Futures and Stock Index Options of the HKFE Rules.
2. PMM may apply to the Exchange for a waiver of the monthly sub-license fee for up to 16 OMnet Application Programming Interface (OAPI) connections (i.e. $2,600 per month per connection or equivalent) to HKATS for HSI Options PMM and up to 8 OAPI connections to HKATS for HHI Options PMM.
3. PMM may apply to the Exchange for additional throughput with mass quote (MQ) function and Market Maker Protection function:
|
Transaction per second (TPS) with MQ: |
1 TPS with MQ for every 3 assigned CQ series |
|
OAPI connection setting for TPS with MQ: |
PMM may select any combination of 5, 10, 20 or 50 TPS per OAPI connection with MQ |
|
Market Maker Protection: |
Provided in respect of options in respect of which the PMM is acting in its capacity as such |
Stock Options PMM Program
Stock Options PMM is required to:
• provide CQ in not less than 150 option series (See Table 2A for details); and
• respond to at least 80% of QR issued for all expiry months (See Table 2B for details)
Obligations in terms of quote size, bid/ask spread and the percentage of trading hours to provide CQ are pre-determined. (See Table 2C).
For the list of stock options PMM, please refer to:
http://www.hkex.com.hk/eng/prod/drprod/hkifo/RTlist_stockoptions.htm
Obligations
Table 2A - CQ Obligations
|
Assigned CQ series |
150 series |
|
CQ series selection pool: |
|
Contract Month |
Series |
Call |
Put |
|
Spot month |
Nearest OTM |
10 |
10 |
|
Nearest ITM |
2 |
2 |
|
2nd Calendar month |
Nearest OTM |
10 |
10 |
|
Nearest ITM |
2 |
2 |
|
3rd Calendar month |
Nearest OTM |
10 |
10 |
|
Nearest ITM |
2 |
2 |
|
4th Calendar month |
Nearest OTM |
10 |
10 |
|
Nearest ITM |
2 |
2 |
|
1st Quarter month |
Nearest OTM |
10 |
10 |
|
Nearest ITM |
2 |
2 |
|
2nd Quarter month |
Nearest OTM |
10 |
10 |
|
Nearest ITM |
2 |
2 |
|
3rd Quarter month |
Nearest OTM |
10 |
10 |
|
Nearest ITM |
2 |
2 |
|
Sub-total |
84 |
84 |
|
Total |
168 |
Table 2B - QR Obligations
Table 2C – Obligations
|
Maximum bid/offer spread and minimum quote size for Option Class other than that with ETF as underlying securities
|
|
Contract Month
|
Level 1
|
Level 2
|
Level 3
|
|
Spot month with 3 Business Days or less to expiry
|
20% of the bid price of the quote or 3 times the best bid/offer spread of the underlying securities, whichever is the lower.
|
20% of the bid price of the quote or 4 times the best bid/offer spread of the underlying securities, whichever is the lower.
|
30% of the bid price of the quote or 7 times the best bid/offer spread of the underlying securities, whichever is the lower.
|
|
Spot month with 4 Business Days or more to expiry and the next 3 calendar expiry months
|
10% of the bid price of the quote or 3 times the best bid/offer spread of the underlying securities, whichever is the lower.
|
10% of the bid price of the quote or 4 times the best bid/offer spread of the underlying securities, whichever is the lower.
|
20% of the bid price of the quote or 7 times the best bid/offer spread of the underlying securities, whichever is the lower.
|
|
The next 2 calendar quarter expiry months
|
20% of the bid price of the quote or 4 times the best bid/offer spread of the underlying securities, whichever is the lower.
|
20% of the bid price of the quote or 6 times the best bid/offer spread of the underlying securities, whichever is the lower.
|
30% of the bid price of the quote or 10 times the best bid/offer spread of the underlying securities, whichever is the lower.
|
|
The 3rd calendar quarter expiry month
|
20% of the bid price of the quote or 8 times the best bid/offer spread of the underlying securities, whichever is the lower.
|
20% of the bid price of the quote or 12 times the best bid/offer spread of the underlying securities, whichever is the lower.
|
30% of the bid price of the quote or 20 times the best bid/offer spread of the underlying securities, whichever is the lower.
|
|
Minimum Quote Size
|
30
|
15
|
15
|
|
Maximum bid/offer spread and minimum quote size for Option Class with ETF as underlying securities
|
|
Contract Month
|
Level 1
|
Level 2
|
Level 3
|
|
Spot month with 3 Business Days or less to expiry
|
20% of the bid price of the quote or 7.5 times the best bid/offer spread of the underlying securities, whichever is the lower.
|
20% of the bid price of the quote or 10 times the best bid/offer spread of the underlying securities, whichever is the lower.
|
30% of the bid price of the quote or 17.5 times the best bid/offer spread of the underlying securities, whichever is the lower.
|
|
Spot month with 4 Business Days or more to expiry and the next 3 calendar expiry months
|
10% of the bid price of the quote or 7.5 times the best bid/offer spread of the underlying securities, whichever is the lower.
|
10% of the bid price of the quote or 10 times the best bid/offer spread of the underlying securities, whichever is the lower.
|
20% of the bid price of the quote or 17.5 times the best bid/offer spread of the underlying securities, whichever is the lower.
|
|
The next 2 calendar quarter expiry months
|
20% of the bid price of the quote or 10 times the best bid/offer spread of the underlying securities, whichever is the lower.
|
20% of the bid price of the quote or 15 times the best bid/offer spread of the underlying securities, whichever is the lower.
|
30% of the bid price of the quote or 25 times the best bid/offer spread of the underlying securities, whichever is the lower.
|
|
The 3rd calendar quarter expiry month
|
20% of the bid price of the quote or 20 times the best bid/offer spread of the underlying securities, whichever is the lower.
|
20% of the bid price of the quote or 30 times the best bid/offer spread of the underlying securities, whichever is the lower.
|
30% of the bid price of the quote or 50 times the best bid/offer spread of the underlying securities, whichever is the lower.
|
|
Minimum Quote Size
|
30
|
15
|
15
|
|
SEHK Stock Code
|
Underlying Stock Name
|
HKATS Code
|
Level of Option Class in July 2022
|
|
2823
|
iShares FTSE A50 China Index ETF
|
A50
|
2
|
|
1299
|
AIA Group Ltd.
|
AIA
|
2
|
|
1211
|
BYD Company Ltd.
|
BYD
|
3
|
|
941
|
China Mobile Ltd.
|
CHT
|
1
|
|
2628
|
China Life Insurance Company Ltd.
|
CLI
|
1
|
|
883
|
CNOOC Ltd.
|
CNC
|
1
|
|
2822
|
CSOP FTSE China A50 ETF
|
CSA
|
1
|
|
27
|
Galaxy Entertainment Group Ltd.
|
GLX
|
2
|
|
388
|
Hong Kong Exchanges and Clearing Ltd
|
HEX
|
2
|
|
5
|
HSBC Holdings Plc.
|
HKB
|
1
|
|
9618
|
JD.com Inc.
|
JDC
|
3
|
|
1024
|
Kuaishou Technology
|
KST
|
3
|
|
9999
|
NetEase, Inc.
|
NTE
|
3
|
|
2318
|
Ping An Insurance (Group) Co. of China Ltd.
|
PAI
|
1
|
|
857
|
PetroChina Co., Ltd.
|
PEC
|
1
|
|
700
|
Tencent Holdings Ltd.
|
TCH
|
1
|
|
2269
|
WuXi Biologics (Cayman) Inc.
|
WXB
|
3
|
|
1288
|
Agricultural Bank of China Ltd.
|
XAB
|
1
|
|
3988
|
Bank of China Ltd.
|
XBC
|
1
|
|
939
|
China Construction Bank Corp.
|
XCC
|
1
|
|
1398
|
Industrial and Commercial Bank of China Ltd.
|
XIC
|
1
|
*Option class with minimum price fluctuation of HK$0.001.
Note: Notwithstanding the above, the Exchange may review the spread group (Group A or B) of each option class on
monthly basis to reflect the change in the market conditions.
In addition, for option classes with min. price fluctuation of HK$0.01, PMM will not be obliged to quote a spread narrower
than the followings:
|
Spread Group |
Underlying Stock Price |
PMM Not Obliged to Quote Narrower than |
|
Underlying Securities which is not ETF |
< $100 |
Best bid/offer spread of underlying security + 5 minimum price fluctuation |
|
>= $100 |
Best bid/offer spread of underlying security + 10 minimum price fluctuation |
|
Underlying Securities which is ETF |
< $100 |
Best bid/offer spread of underlying security + 7 minimum price fluctuation |
|
>= $100 |
Best bid/offer spread of underlying security + 15 minimum price fluctuation |
For option classes with minimum price fluctuation of HK$0.001, PMM will not be obliged to quote a spread narrower
than $0.03.
In addition, PMM will not be obliged to quote for the bid side in response to a QR for a far out-of-the-money Contract
which has a value near zero. A PMM shall remain obliged to quote for the sell side by issuing a sell limit order with
a limit price no greater than 10 and 30 minimum price fluctuations in option classes with minimum price fluctuations
of HK$0.01 and HK$0.001 respectively within the required response time and for the minimum required quantity and duration.
Incentives
1. Upon fulfillment of obligations, PMM will pay a discounted trading fee for each options contracts traded by PMM:
|
Stock Options Tier |
Standard |
CQMM / QRMM |
PMM |
|
1 |
HK$3.00 |
HK$1.50 |
HK$1.20 |
|
2 |
HK$1.00 |
HK$0.80 |
HK$0.60 |
|
3 |
HK$0.50 |
HK$0.40 |
HK$0.30 |
2. PMM may apply to the Exchange for a waiver of the monthly sub-license fee for up to 2 OAPI connections (i.e. $2,600
per month per connection or equivalent) to HKATS for each option class.
3. PMM may apply to the Exchange for additional throughput with mass quote (MQ) function and Market Maker Protection
function:
4. For each option class, PMM shall entitle to a wavier of one-off fee for applying for an increase in the Central Gateway throughput rate by one standard Central Gateway throttle rate.
