- Minimum spreads of Applicable Securities to be reduced by 50%-60% in two phases, to lower overall transaction costs and boost liquidity
- Phase 1 to be implemented in mid-2025; Phase 2 to be launched one year later, subject to review of Phase 1 implementation
- Stock Settlement fee structure, order input price limit and market making obligations for relevant single stock options also to be adjusted
Hong Kong Exchanges and Clearing Limited (HKEX) is pleased to announce today (Tuesday) the conclusions to its Consultation Paper on the proposed reduction of minimum spreads in the Hong Kong securities market.
HKEX received 110 non-duplicate responses from a wide spectrum of market participants. The proposals to reduce minimum spreads of equities, Real Estate Investment Trusts (REITs) and other Applicable Securities (excluding Exchange Traded Products (ETPs), debt securities, Exchange Traded Options (ETOs) and Structured Products) in two phases received support from a majority of respondents, both in terms of the total number of respondents and from the proportion of the cash market turnover that the respondents in support of the proposals represent.
Having carefully considered feedback from the consultation, HKEX will proceed with its proposal to reduce minimum spreads of the Applicable Securities in two phases (see table below). In order to provide adequate preparation time, Phase 1 will be implemented in mid-2025, while Phase 2 will be implemented in mid-2026, subject to a review of Phase 1’s results.
Changes to spread table of the Applicable Securities
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Price Band
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Original Minimum Spread
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New Minimum Spread
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Phase 1
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$10.00 - $20.00
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$0.020
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$0.010 (-50%)
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$20.00 - $50.00
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$0.050
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$0.020 (-60%)
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Phase 2
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$0.50 - $10.00
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$0.010
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$0.005 (-50%)
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HKEX Deputy Chief Executive Officer, Co-Chief Operating Officer, and Co-Head of Markets, Wilfred Yiu, said: “HKEX is fully committed to elevating the depth and vibrancy of its markets, and this is reflected in the continuous rollout of new microstructure enhancements. The minimum spreads reduction is the latest effort on this journey, and we are delighted to be moving forward with this important reform that will help lower overall transaction costs and support a more efficient price discovery process. We would like to sincerely thank all our market participants and stakeholders for taking part in the consultation process; their valuable feedback and support will help contribute to the long-term competitiveness and attractiveness of Hong Kong’s markets.”
The minimum spread is the minimum price change for a stock traded on an exchange and determines the tightest bid-ask spread allowed. A reduction of minimum spreads could therefore encourage trades to be transacted in smaller sizes.
To help facilitate the smooth implementation of the reduction of minimum spreads without increasing the overall market trading cost, the stock settlement fee is proposed to be restructured. The minimum and maximum components would be removed and replaced with an adjusted fee rate charged on notional value traded. The new fee structure is designed to be cost-neutral to the market as a whole, while providing a more equitable and deterministic cost structure. The proposal is under consideration by the Securities and Futures Commission. Further details will be announced in due course, subject to regulatory approval.
Alongside the changes in minimum spreads, HKEX will also adjust the order input price limit and make temporary adjustments to the market making obligations for the relevant single stock options, to provide greater flexibility for order input and trading activities under the tightened spreads.
The Consultation Conclusions and copies of the respondents’ submissions are available on the HKEX website. The effective dates of Phase 1 and Phase 2 will be announced in due course, subject to market readiness.
About HKEX
Hong Kong Exchanges and Clearing Limited (HKEX) is a publicly-traded company (HKEX Stock Code: 388) and one of the world’s leading global exchange groups, offering a range of equity, derivative, commodity, fixed income and other financial markets, products and services, including the London Metal Exchange.
As a superconnector and gateway between East and West, HKEX facilitates the two-way flow of capital, ideas and dialogue between China and the rest of the world, through its pioneering Connect schemes, increasingly diversified product ecosystem and its deep, liquid and international markets.
HKEX is a purpose-led organisation which, across its business and through the work of HKEX Foundation, seeks to connect, promote and progress its markets and the communities it supports for the prosperity of all.
www.hkexgroup.com
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