Hong Kong Exchanges and Clearing Limited (HKEX) announced today (Friday) that it plans to implement Phase 2 of its securities market's Closing Auction Session (CAS) in the early third quarter of 2017, subject to relevant regulatory approvals by the Securities and Futures Commission.
In 2015, HKEX concluded after a public consultation that the CAS would be rolled out in two phases to ensure a smooth transition.
CAS Phase 1 (Phase 1), covering all constituents of the Hang Seng Composite LargeCap and MidCap indices, H shares which have corresponding A shares listed on a Mainland exchange and all Exchange Traded Funds, or ETFs, (together CAS Securities), was successfully launched on 25 July 2016.
CAS Phase 2 (Phase 2) will expand list of CAS Securities to include constituents of the Hang Seng Composite SmallCap Index (HSSI) and allow regulated short-selling orders1 to be placed during the CAS at a price not lower than the CAS Reference Price.
"The results of our review of Phase 1 show the CAS being a very effective way to facilitate execution at close. It does not only help reduce tracking errors for index funds and benefit fund investors, but also has no adverse impact on market integrity, non-fund investors or other market participants," said Roger Lee, HKEX Head of Markets. "In view of positive feedback, we will implement Phase 2 as planned to further meet institutional investors' need for execution at close."
As a result of Phase 2 implementation, about 680 stocks and ETFs (about 150 HSSI stocks in addition to the current CAS Securities) will be included in the CAS, of which about 660 are on the latest list of Designated Securities eligible for short selling.
Further details of HKEX's Phase 2 plan are available in the briefing pack available on the HKEX website.
1 Regulated short selling orders on HKEX’s securities market (the Exchange) must:
- Be covered short sale;
- Be placed only on Designated Securities eligible for short selling;
- Be automatically struck through the Exchange system, both during the Continuous Trading Session (CTS), and during CAS after the Phase 2 rollout;
- Observe “tick rule”,ie, a short sale order of a Designated Security shall not be made on the Exchange below the prevailing ask price during CTS, or the CAS Reference Price during CAS after the Phase 2 rollout; and
- Comply at all times with the Securities and Futures Ordinance, and the regulations regarding short selling in the Eleventh Schedule to the Rules of the Exchange.