Primary Market Maker Program

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, Hang Seng Tech Index (HTI) Options and selected stock options classes. PMM is required to provide continuous quotes (CQ) and also responds to quote requests (QR).

HSI, HHI and HTI Options PMM Program

HSI, HHI and HTI 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, HHI and HTI options PMM, please refer to:

http://www.hkex.com.hk/eng/prod/drprod/hkifo/RTlist_equityindex.htm

Obligations

Table 1A - CQ Obligations (For HSI, HHI & HTI Options)

Assigned CQ series		100 series
CQ series selection pool:
Contract Month	Moneyness	Call	Put
Spot month	Nearest OTM	15	15
Spot month	Nearest ITM	2	2
2^nd calendar month	Nearest OTM	15	15
2^nd calendar month	Nearest ITM	2	2
3^rd calendar month	Nearest OTM	15	15
3^rd calendar month	Nearest ITM	2	2
4^th calendar month	Nearest OTM	15	15
4^th calendar month	Nearest ITM	2	2
1st quarter	Nearest OTM	15	15
1st quarter	Nearest ITM	2	2
2nd quarter	Nearest OTM	15	15
2nd quarter	Nearest ITM	2	2
3rd quarter	Nearest OTM	15	15
3rd quarter	Nearest ITM	2	2
Sub-total		119	119
Total		238
Min. Trading Hours		90% of trading hours in T Session in a month

Assigned CQ series		100 series

Table 1B - QR Obligations (For HSI, HHI & HTI Options)

Min. Respond to QR Requirement	70% of QR received in T Session in a month for all short-dated expiry contract months
Max. Time Limit for Responding to QR	20 secs
Min. Display Time	20 secs

Table 1C – Obligations determined by bidding (For HSI & HHI Options)

			Level 1
Min Quote Size	Spot, 2^nd , 3^rd, 4^thcalendar		7
Min Quote Size	1^st, 2^nd,3^rdquarter		5
Max Bid/ Ask Spread	Spot, 2^nd, 3^rd, 4^th calendar	1-750 points	Max (30 points, 10% of bid)
	Spot, 2^nd, 3^rd, 4^th calendar	> 750 points	75 points
	1^st, 2^nd quarter	1-750 points	Max (40 points, 15% of bid)
	1^st, 2^nd quarter	> 750 points	115 points
	3^rd quarter	1-750 points	Max (50 points, 20% of bid)
	3^rd quarter	> 750 points	150 points
Min. CQ Trading Hours			90%

			Level 1

Table 1D – Obligations determined by bidding (For HTI Options)

			Level 1
Min Quote Size	Spot, 2^nd, 3^rd, 4^thcalendar		7
Min Quote Size	1^st, 2^nd,3^rdquarter		5
Max Bid/ Ask Spread	Spot, 2^nd, 3^rd, 4^thcalendar	1-750 points	Max (12 points, 10% of bid)
	Spot, 2^nd, 3^rd, 4^thcalendar	> 750 points	75 points
	1^st, 2^nd quarter	1-750 points	Max (16 points, 15% of bid)
	1^st, 2^nd quarter	> 750 points	115 points
	3^rdquarter	1-750 points	Max (20 points, 20% of bid)
	3^rdquarter	> 750 points	150 points
Min. CQ Trading Hours			90%

			Level 1

Incentives

1. Upon fulfillment of obligations, PMM will pay:

(i) a discounted trading fee for each HSI Options, HHI Options and HTI Options contract traded by PMM:

Product	Standard	CQMM	QRMM	PMM
HSI Options	HK$ 10.00	HK$ 2.00
HHI Options	HK$ 3.50	HK$ 0.50
HTI Options	HK$ 5.0 ^{Note 1}	HK$ 1.0

Product	Standard	CQMM	QRMM	PMM

Note 1:

The Exchange is now offering market-wide 50% trading fee discount (i.e. HKD 2.5 per contract) for HSTECH options.

(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, HHI Options and HTI 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, up to 8 OAPI connections to HKATS for HHI Options PMM and up to 8 OAPI connections to HKATS for HTI 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
Spot month	Nearest ITM	2	2
2nd Calendar month	Nearest OTM	10	10
2nd Calendar month	Nearest ITM	2	2
3rd Calendar month	Nearest OTM	10	10
3rd Calendar month	Nearest ITM	2	2
4th Calendar month	Nearest OTM	10	10
4th Calendar month	Nearest ITM	2	2
1st Quarter month	Nearest OTM	10	10
1st Quarter month	Nearest ITM	2	2
2nd Quarter month	Nearest OTM	10	10
2nd Quarter month	Nearest ITM	2	2
3rd Quarter month	Nearest OTM	10	10
3rd Quarter month	Nearest ITM	2	2
Sub-total		84	84
Total		168

Assigned CQ series		150 series

Table 2B - QR Obligations

Min Respond to QR Requirement	80% of QR
Max Time Limit for Responding to QR	20 seconds
Min Display Time	20 seconds

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 other than that with ETF as underlying securities

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

Maximum bid/offer spread and minimum quote size for Option Class with ETF as underlying securities

SEHK Stock Code	Underlying Stock Name	HKATS Code
2823	iShares FTSE A50 China Index ETF	A50
1299	AIA Group Ltd.	AIA
9888	Baidu, Inc.	BIU
1211	BYD Company Ltd.	BYD
941	China Mobile Ltd.	CHT
883	CNOOC Ltd.	CNC
2822	CSOP FTSE China A50 ETF	CSA
388	Hong Kong Exchanges and Clearing Ltd	HEX
5	HSBC Holdings Plc.	HKB
9618	JD.com Inc.	JDC
1024	Kuaishou Technology	KST
2015	Li Auto Inc.	LAU
9999	NetEase, Inc.	NTE
2318	Ping An Insurance (Group) Co. of China Ltd.	PAI
857	PetroChina Co., Ltd.	PEC
981	Semiconductor Manufacturing International Corp.	SMC
700	Tencent Holdings Ltd.	TCH
2269	WuXi Biologics (Cayman) Inc.	WXB
3988	Bank of China Ltd.	XBC
939	China Construction Bank Corp.	XCC
1398	Industrial and Commercial Bank of China Ltd.	XIC

SEHK Stock Code	Underlying Stock Name	HKATS Code

Please refer the Liquidity Level for each stock option class on the Market Making/Liquidity Providing Obligations and Incentives webpage.

*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
Underlying Securities which is not ETF	>= $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
Underlying Securities which is ETF	>= $100	Best bid/offer spread of underlying security + 15 minimum price fluctuation

Spread Group	Underlying Stock Price	PMM Not Obliged to Quote Narrower than

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

Stock Options Tier	Standard	CQMM / QRMM	PMM

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:

Transaction per second (TPS) with MQ:	1 TPS with MQ fo 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

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.

Updated 30 Jun 2017