Standard Combination and Block Trade

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What are the special features for standard combination in HKATS?

HKATS generates derived order from the price of the outstanding Standard Combination Order and the prevailing market price of each individual leg. In addition, user can enter 'Day', 'Fill-or-Kill (FoK)' and 'Fill-and-Kill (FaK)' order for standard combination series, while Block Trade is not allowed to be executed. As all the combination series expire and rebuilt on a daily basis, no 'Good Till Cancel (GTC)' order is allowed.

What is Standard Combination Order?

Standard Combination Order is the simultaneous purchase and/or sale of two different series with the same underlying. Each standard combination series is pre-defined by HKEX as a combination strategy with two legs in HKATS. Traders in HSI Futures market have been using Standard Combination Order in HKATS for calendar spreads (i.e. buy and sell two futures contracts with different expiration date simultaneously) in order to roll their open positions from spot month to the next month since June 2000. The orders have been used actively in futures trading, especially approaching the end of each calendar month.

Can Exchange Participants file error trade claims on standard combination trades?

According to HKFE Error Trade Rule 819B, Exchange Participants can file Error Trade claim(s) on standard combination trades (for the portion of Combination Vs. Combination trades only) within the prescribed time limit (10 minutes).

What is the price reporting mechanism for standard combination trade?

Standard combination trades are reported in corresponding legs of the standard combination series. All standard combination trades are reported in HKATS through the Ticker, Company Trades and Clearing Trades windows. Standard combination versus standard combination trades will carry the deal flag, 'STC', while standard combination versus outright trades will be marked as ‘Cbo v. Outr’.

Is there any market maker for standard combination series?

There is no market maker for standard combination series and existing market makers have no obligation in responding quote request on standard combination series. On the other hand, the quotation from individual legs will be indirectly reflected on the standard combination order due to generation of derived order(s).

What are the benefits of using the standard combination order?

The benefit of using standard combination order is that it can be placed as a limit order instead of a market order, making each order visible to all HKATS users. Also, the transaction cost is likely to be reduced in terms of the spreads between the limit price and the bid/ask prices.

Can a Block Trade be executed during the Pre-market period?

Block Trade should not be executed during the Pre-market period.

When would the Exchange notify broker on the cancellation of invalid Block Trade?

Within 30 minutes of the execution of the Block Trade, the Exchange endeavour to notify the Exchange Participants if any criteria (such as permissible price range, minimum volume threshold) have not been met or any special margin is required. If all criteria have been met and the special margin could be settled within the prescribed time, the Block Trade would be novated and guaranteed by the Clearing House without further notice.

Why is there a special margin for Block Trade?

Special margin may be required as a significant deviation may exist between the prevailing market price and the executed price of the Block Trade.

Is there any penalty in executing an invalid Block Trade?

There is no penalty in executing an invalid Block Trade.

If an Exchange Participant forget to execute a Block Trade, can he submit a 'Form 7' (Application for correction of erroneous trade) after market closes?

No. 'Form 7' will not be accepted for Block Trade after market closes.

A client put in an order for 200 lots, can this order be matched by two or more clients and then put into HKATS as a Block Trade?

Aggregation of orders in Block Trade is generally not allowed, unless the Block Trade is able to satisfy all requirements laid down in 815A(2A) of the Rules, Regulations and Procedures of the Futures Exchange.