The Volatility Control Mechanism is designed to prevent extreme price volatility from trading incidents such as a “flash crash” and algorithm errors, and to address systemic risks from the inter-connectedness of securities and derivatives markets. Many international exchanges have implemented some form of VCM. In the case of HKEX’s VCM, if the price deviates more than a predefined percentage within a specific time frame, it will trigger a cooling-off period for five minutes. This provides a window allowing market participants to reassess their strategies, if necessary. It also helps to re-establish an orderly market during volatile market situations.
Which securities and futures
contracts are covered by VCM?
In the securities market, the VCM will cover Hang Seng Index (HSI) and Hang Seng China Enterprise Index (HSCEI) constituent stocks (as of 31 May 2016 there were 81 such stocks listed on the Stock Exchange of Hong Kong).
In the derivatives market, the VCM will cover spot and next calendar month index futures contracts with HSI or HSCEI as their underlying index (currently eight futures contracts).
What is the applicable
period for VCM?
VCM is applicable to continuous trading session (CTS), excluding:
the first 15 minutes of the morning and afternoon trading session
the last 15 minutes of the afternoon trading session
the After-Hours Futures Trading session in the derivatives market
The Volatility Control Mechanism is designed to prevent extreme price volatility from trading incidents such as a “flash crash” and algorithm errors, and to address systemic risks from the inter-connectedness of securities and derivatives markets. Many international exchanges have implemented some form of VCM. In the case of HKEX’s VCM, if the price deviates more than a predefined percentage within a specific time frame, it will trigger a cooling-off period for five minutes. This provides a window allowing market participants to reassess their strategies, if necessary. It also helps to re-establish an orderly market during volatile market situations.
Which securities and futures
contracts are covered under VCM?
In the securities market, the VCM will cover Hang Seng Index (HSI) and Hang Seng China Enterprise Index (HSCEI) constituent stocks (as of 31 May 2016 there were 81 such stocks listed on the Stock Exchange of Hong Kong).
In the derivatives market, the VCM will cover spot and next calendar month index futures contracts with HSI or HSCEI as their underlying index (currently eight futures contracts).
What is the
applicable period for VCM?
VCM is applicable to continuous trading session (CTS), excluding:
the first 15 minutes of the morning and afternoon trading session
the last 15 minutes of the afternoon trading session
the After-Hours Futures Trading session in the derivatives market