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 and selected stock options classes. PMM is required to provide continuous quotes (CQ) and also responds to quote requests (QR). A maximum of 5 PMM permits will be granted for each option product with applicants selected through bidding process. The selection is primarily based on the applicant's obligation commitment and past market making quality.

HSI and HHI Options PMM Program for the period from 2 January 2019 to 31 December 2019

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 determined through bidding process. (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

 Table 1C – Obligations determined by bidding

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:  

(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:

Stock Options PMM Program for the period of 2 July 2019 to 30 June 2020

  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 determined through bidding process. (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

  Table 2B - QR Obligations

Table 2D – Maximum Bid/Offer Spread Obligation (Level 1 Obligation)

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: 

 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:

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.