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Block Trade Facility

The Block Trade Facility is an important tool in extending the Exchange's services. A block trade comprises large buy and sell orders privately negotiated apart from the public auction market. Benefits to the market place include:

  1. Price and execution certainty for large sized deals; and

  2. Clearing House* guarantees for transactions that may otherwise have been executed over-the-counter (OTC); and

  3. Added liquidity

Criteria for Block Trade

Each Block Trade must be executed in the manner and must satisfy the criteria set forth below:

  1. Eligible Users
  2. Block trades may be executed between the client accounts, house accounts and/or market maker accounts of an Exchange Participant*.

  3. Applicable Markets

  4. The Block Trade Facility will be applicable to all products (except listed combination orders), contract months and strike series listed on the HKATS, except the Mini-HSI futures and options and Mini-HSCEI futures and options contracts.
     
  5. Permissible Price Range & Minimum Volume Threshold (MVT) 

     

    Execution price
    The price at which a block trade is executed must be fair and reasonable, and the permissible price range is determined in the following manners:

    (a) When the executed price is at or within the range of highest traded price, lowest traded price, bid and ask price of the contract; or
    (b) When the executed price is within the following price range to both sides of a reference price obtained through prevailing market prices, or if necessary, determined as the theoretical values based on the prevailing underlying values:
        
     The price range and minimum volume threshold of each product eligible for block trading is set forth below 
             
       Minimum Volume Threshold  (MVT)  Permissible Price Range
     Stock Index Futures
                 - Short-dated Futures
                 - Long-dated Futures
     
     100 contracts
     100 contracts
     
     1%
     3%
     HSI Total Return Index Futures
                 - Short-dated Futures
                 - Long-dated Futures

    10 contracts
    10 contracts
     
    1%
    3%
     HSCEI Total Return Index Futures
                 - Short-dated Futures
                 - Long-dated Futures
     
     30 contracts
     30 contracts
     
    1%
    3%
     Stock Index Options
    • Short-dated Options
       - if price > 300 index points
       - if price =< 300 index points
    • Long-dated Options
       - if price > 300 index points
       - if price =< 300 index points
     

     100 contracts
     100 contracts

     100 contracts
     100 contracts
     
     
     10%
     30 index points
     
     30%
     90 index points
     Stock Futures   100 contracts  3%
     Stock Options  500 contracts  Whichever is narrower :
         - The difference between the trade price and reference price is at or within 3% of the nominal price of the underlying security at the time the trade occurred; or
         - The difference between the trade price and the reference price is such that it is at or within 2 times the maximum spread permitted under Market Maker Obligations and the difference represents not more than 30% of the reference price
     MSCI AxJ Futures  50 contracts   3%
     HIBOR Futures  80 contracts#  25 basis points
     HIBOR Strips 20 contracts  No permissible price range for
    HIBOR Strips
     Dividend Futures  100 contracts  1%
     HSI Volatility Index Futures         100 contracts  1%
     RMB Currency Futures  50 contracts  3%
     RMB Currency Options
               - if price >= 0.4000
               - if price < 0.4000
     
     50 contracts
     50 contracts
     
     10%
     0.040
     London Metal Mini Futures   50 contracts  No permissible price range for
    London Metal Mini Futures
     USD Gold Futures  30 contracts  3%
     CNH Gold Futures  30 contracts  3%
     Iron Ore Futures  50 contracts  4%
         

    *At all times, the Exchange has the absolute discretion to make a final decision in determining whether an executed price is fair and reasonable taking into consideration factors such as the traded prices on previous days, traded prices and prevailing bid and ask prices of other futures contract months or option series of the Block Trade Contract, the volatility and liquidity of the relevant Market, the size of the Block Trade order and general market conditions.

    # For a single order involving a spread or a strategy combination except HIBOR strips, at least one of the legs of the spread or combination must meet the Minimum Volume Threshold.

     
  6. Block Trade Order Aggregation
  7. No aggregating of separate orders or combining of separate orders to generate a spread or strategy combination block trade unless:

    a. at least one of the separate orders from either side meets the MVT; and
    b. the block trade does not involve futures contracts only; and
    c. in the case of a spread or strategy combination, at least one of the separate orders comprising an option leg satisfies the applicable MVT;
    d. in the case of Stock Index Options Contracts, all legs of a spread or a strategy combination that relate to Flexible Options must meet the Minimum Volume Threshold and
    e. authorizations have been received from Clients whose orders are being aggregated or combined

  8. Block Trade Order Entry
  9. Block trades must be negotiated and registered through HKATS during the normal trading hours of the contracts and in a manner that is outlined in HKATS User’s Guide.

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.

The symbol "EMP 1 BR" or "EMP D BR" will be displayed next to each Block Trade in the Ticker Window of HKATS terminal to differentiate the Block Trades from trades matched by orders entered into the Central Orderbook.

Clearing Arrangements

To protect the Clearing Houses from additional risk arising from Block Trades, the following measures will be implemented:

  1. Novation of Block Trade
  2. The registration of a Block Trade shall not occur until the Clearing House is satisfied that the Block Trade recorded in the Transaction Register of HKATS is a valid Block Trade and all criteria applicable to the Block Trade, including but not limited to the deposit of any Special Block Trade Margin, have been satisfied. If an Exchange Participant does not receive any oral or written notice from the Exchange or the respective Clearing Houses within 30 minutes of its execution of a Block Trade that the Block Trade is not valid or not registered with or cleared by the respective Clearing Houses for any reason, the Block Trade shall be deemed to be registered with the respective Clearing Houses and subject to the process of novation.

  3. Special Block Trade Margin
  4. If in the opinion of the Clearing House or the Exchange, the executed price of a Block Trade is not fair and reasonable or a significant deviation exists between the prevailing market price and the executed price, or if a Block Trade is executed at such a price that an intra-day margin call would have been triggered had the trade been executed as a normal trade in the Central Orderbook, the Clearing House may, within 30 minutes after the Block Trade is executed, call for Special Block Trade Margin from the relevant Clearing House Participants.

    1. HKCC products
    2. Any Special Block Trade Margin payable by an HKFE Clearing Corporation (HKCC) Participant will be debited from its relevant Direct Margin Debiting System (DMDS) bank account. If the amount to be debited from the account of the HKCC Participant cannot be fully covered by the surplus funds present in its account, HKCC will inform the HKCC Participant by phone or by any other means as HKCC may consider appropriate and the HKCC Participant shall forthwith ensure that there are sufficient funds deposited in its relevant DMDS bank account for debiting purpose.

      No amount will be credited to HKCC Participants as a result of any Special Block Trade Margin call.

      HKCC Participants are advised to arrange additional cover to deal with any potential Special Block Trade Margin.

    3. SEOCH products
    4. Where Special Block Trade Margin is called for, SEHK Options Clearing House (SEOCH) will fax a Special Block Trade Margin Call Notice to the relevant SEOCH Participant. The SEOCH Participant shall arrange enough funding in its bank accounts in order to cover the Special Block Trade Margin call within one hour after notification or such shorter period as may from time to time be prescribed by SEOCH.

  5. Deletion of Block Trade
  6. If an Exchange Participant has been notified by the respective Exchanges or the Clearing Houses that a Block Trade executed by the Exchange Participant on HKATS is not valid or has not satisfied all the criteria applicable to the Block Trade, or the Block Trade will not be registered with or cleared by the respective Clearing Houses for any reason, or if the Exchange Participant fails to deposit any Special Block Trade Margin required by the respective Clearing Houses by the stipulated time, the Exchange in conjunction with the Clearing House will, without being required to give further notice to the Exchange Participant, delete the Block Trade as if the Block Trade had never been executed.

  7. Trade Adjustments      
    1. HKCC products
    2. For Block Trades executed during the T Session on a Business Day, trade adjustment request may be submitted at any time 30 minutes prior to the System Input Cutoff Time on the same Business Day or 30 minutes prior to the System Input Cutoff Time on the next Business Day. For Block Trades executed during the T+1 Session on a Business Day, trade adjustment requests may be submitted at any time 30 minutes prior to the T+1 Session Cutoff Time on the same Business Day or 30 minutes prior to the System Input Cutoff Time on the next Business Day.

      Trade adjustment requests in respect of a Block Trade will be rejected by the Clearing House if the Block Trade is determined by the Clearing House to be invalid for any reason. In the event that a trade adjustment request relates to the internal or external transfer of a valid Block Trade, but the trade adjustment request is subsequently determined by the Clearing House or the Exchange to be invalid for any reason (including where the transferring or receiving HKCC Participant fails to pay or otherwise satisfy any Special Block Trade Margin arising from the trade adjustment request by the prescribed time), such trade adjustment request will be rejected by the Clearing House.

    3. SEOCH products
    4. Any trade adjustment request in respect of a Block Trade shall be submitted by SEOCH Participants at any time 30 minutes prior to the System Input Cutoff Time on the same Business Day or 30 minutes prior to the System Input Cutoff Time on the next Business Day.

      A trade adjustment request in respect of a Block Trade will be rejected by SEOCH if the Block Trade is determined by SEOCH to be invalid for any reason. In the event that a trade adjustment request relates to Open/Close or Account Transfer adjustment of a valid Block Trade, but the trade adjustment request is subsequently determined by SEOCH or the Exchange to be invalid for any reason (including where the transferring or receiving SEOCH Participant fails to pay or otherwise satisfy any Special Block Trade Margin arising from the trade adjustment request by the prescribed time), such trade adjustment request will be rejected by SEOCH. Notwithstanding the foregoing, SEOCH has the sole discretion to accept or reject any Block Trade adjustment, in particular but not limited to any trade adjustment request submitted after the prescribed deadline.

  8. Clearing House's Discretion on Registration of Block Trade
  9. The Clearing House shall have absolute discretion to determine the acceptance or refusal for registering and clearing any Block Trade Contract executed through HKATS. The Clearing House shall give notice to the Exchange and to the relevant Clearing House Participants of any decision to refuse to register and clear any Block Trade Contract.

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 reminded 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.  

Note:

Clearing House refers to the HKFE Clearing Corporation (HKCC) and the SEHK Options Clearing House (SEOCH).

Exchange Participant refers to Futures Exchange Participants, who can use the Block Trade Facility for stock index futures, stock index options, stock futures, HIBOR futures, HIBOR strips, Dividend Futures, HSI Volatility Index Futures, RMB Currency Futures, RMB Currency Options, LME Metal Mini Futures, Gold Futures, and Iron Ore Futures, and Options Trading Exchange Participants, who can use the Block Trade 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, HIBOR futures, HIBOR strips, Dividend Futures, HSI Volatility Index Futures, RMB Currency Futures, RMB Currency Options, LME Metal Mini Futures, Gold Futures, and Iron Ore Futures, and the Chief Executive of the Stock Exchange for stock options.


Updated 07 Jul 2017

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