HKEX’s proposed VCM is specifically designed to safeguard market integrity from extreme price volatility arising from automated trading (“Flash Crash”, bad algorithms, etc.). It also serves to alert the market with a temporary cooling-off period for the participants to reassess their strategies and positions and make investment decisions. It is not a trading halt, does not intend to limit the ups and downs of stock prices due to fundamental events, and it also does not work the same way as the daily price limit model which sets a specific daily price range for securities trading as seen in some markets.

Special care has been taken in the VCM design to minimise market interruption. For example, it applies to individual instrument rather than the entire market, it is based on a dynamic rather than a static reference price, the triggering level (±10%, ±15%, or ±20% for securities market depending on the stock group) is set up such that it would not trigger the VCM too often, and the VCM monitoring is not applicable in certain periods (the first 15 minutes of the morning and afternoon CTS and the last 20 minutes of the afternoon CTS [morning CTS on half-day trading day]) and to certain instruments.  

For the securities market, the VCM covers all constituent stocks of Hang Seng Composite LargeCap, MidCap and SmallCap Indexes, SPAC Shares, SPAC Warrants, and eligible Exchange Traded Products (ETPs).

The list of the VCM securities and their triggering thresholds are published on the HKEX website.

Any addition of constituent stocks to the indexes will also be added to the list of VCM securities on the effective date of the addition. Similarly, any deletion of constituent stocks from the indexes will also be removed from the list VCM securities on the effective date of the deletion.

For SPAC Shares and SPAC Warrants, they are added to the list of VCM securities on their listing date.

The Exchange will review the list of ETPs to be included into or removed from the list of VCM securities every quarter and will announce the review result via a circular.

• the first 15 minutes of the morning and afternoon trading session
• the last 20 minutes[1] of the afternoon trading session (or morning CTS on half-day trading day)     

In the case that market open is delayed due to bad weather (e.g. issuance of Typhoon Signal No.8 or above or Extreme Conditions or Black Rainstorm Warning), similar to the normal market open, the first 15 minutes after market open will not be subject to the VCM monitoring.

Since the affected underlying security or index is not suspended and continues to trade within a specified price limit during the 5-minute cooling off period after the triggering of the VCM, the derivative warrants and CBBCs can still be traded without any price limit. 

Investors should be aware that standards for Active Quotes described in the Industry Principles[1] are intended to apply to normal market conditions.   Provision of Active Quotes may be affected where there are abnormal or exceptional market conditions. 

Quotes provided by liquidity providers necessarily reflect the liquidity of the underlying securities or indices at any given time. If the liquidity of the underlying is impaired by conditions surrounding a VCM event, or by the VCM itself, the liquidity of the warrant or CBBC may be adversely affected in terms of quote size and spread relative to more normal market conditions.

During the 5-minute cooling off period after triggering of the VCM, where issuers’ hedging ability is materially affected due to the uncertainty in the underlying securities or index, it is possible that the minimum service level for Active Quotes will not be fulfilled, such as no bid-ask quotations, widening of bid-ask spread and reduction in quote size.

However, issuers will use best efforts to meet quote request requirements.