Securities Market

The POS is an additional trading session of 30 minutes, in the form of a single price auction, which takes place before the Morning Trading Session.  It accommodates potentially market moving overnight news and events, and facilitate an orderly and smooth price discovery process. It helps to determine a security’s fair opening price by bringing together buying and selling interest, and then executing trades at a single price point, where maximum volume can be traded.

POS covers only equities (including depository receipts, investment companies, preference shares and stapled securities), funds (including Exchange Traded Funds (ETFs) and REITs) and leveraged and inverse products (L&I Products) (together the “POS Securities”).  Debt securities, structured products (including Derivative Warrants (DWs), Callable Bull/Bear Contracts (CBBCs) and Inline Warrants (IWs)), equity warrants and rights are not covered by the POS.  Order input on these non-POS Securities during the POS will be rejected.

A price limit of ±15% in POS in the securities market is adopted in order to prevent excessive price movement during any high volatility scenarios (by controlling the price of at-auction limit orders input during POS). HKEX is of the view that a ±15% price limit from the previous closing price would be suitable as it takes into account the larger room for price discovery inherently necessary for an opening auction while not being overly restrictive. Internationally and in recent years, it is observed that a trend of adopting price limits/collars which may be applicable to POS as well. It should also be noted that there would be certain pre-defined scenarios where the price limit feature will not apply, such as when the previous closing price is absent (e.g. for IPO stocks) or for stocks resuming from trading suspension*. The ±15% limit will not be applicable to these stocks and the price discovery function would not be impacted. In case a stock cannot open in POS due to the ±15% price limit, trading in such stock will continue as usual during the Continuous Trading Session (CTS) without a price limit. Based on past statistics, only a very few number of stocks would move more than 15% in POS on a daily basis versus their previous closing prices, and they represent a very small portion of market turnover.

* For stocks resuming from a trading suspension, the price limit check will not be applied for the first day of trading resumption only.

During the POS, only at-auction orders and at-auction limit orders are accepted, and these order types can only be entered starting from 9:00am (the beginning of the Order Input Period).

An at-auction order is a market order without a specified price. It enjoys a higher order matching priority than an at-auction limit order. It will be cancelled automatically after order matching. Investors who place at-auction orders should note that the final traded price (i.e. final IEP) is not known at the time of order input and may not fall within their expected price range.

An at-auction limit order is a limit order with a specified price. After order matching in the POS, unfilled at-auction limit orders with input price not deviating 9 times or more from the nominal price will be converted to limit orders and carried forward to the Morning Trading Session.

Exchange Participants are allowed to report the pre-open trades within the first 15 minutes of the Morning Trading Session.

For POS Securities, the POS is an additional period for reporting pre-open trades. Input of pre-open trade (for both Direct Business and Non-direct Business transactions) for POS Securities is allowed during the POS from the start of the Order Input Period until matching happens (i.e. from 9:00am to the time of matching which is a random time between 9:20am-9:22am).

During the Continuous Trading Session, orders will be matched continuously and automatically by OTP-C when the specified prices of buy orders and sell orders match. Only limit orders, enhanced limit orders and special limit orders will be accepted during this period.

During the POS, orders for POS Securities are allowed to be entered into OTP-C for a single price auction:  

1. During the Order Input Period, No-cancellation Period and Random Matching Period, only at-auction orders and at-auction limit orders will be accepted. These orders will be accumulated and updated but no matching will occur during these periods.


2. At the end of the Random Matching Period, orders are matched in order type (at-auction orders carry a higher matching priority), price and time priority, at the final IEP.

There are a number of differences in the information disseminated during the POS and the Continuous Trading Session and they are further explained as follows:

• Nominal price

During the POS, the nominal price of an issue of securities will be equal to the IEP (if the IEP is available) or the previous closing price (if the IEP is not available) of the issue. During the Continuous Trading Session, the nominal price of a security determined by comparing the current bid price, current ask price and last recorded price /previous closing price, as the case may be of the security.

• Best bid /ask prices

During the POS, the best bid price and best ask price means the IEP or, if the IEP is not available, the most competitive prices on the corresponding side (i.e. buying or selling).

During the Continuous Trading Session, the best bid price means the highest bid price and the best ask price means the lowest ask price.

• Primary queue

During the POS, the primary queue means the queue of at-auction orders and at-auction limit orders with a specified price at or more competitive than the IEP. In case of buying, the specified price equals or is higher than the IEP; and in case of selling, the specified price equals or is lower than the IEP. If the IEP is unavailable, the primary queue is the queue of at-auction limit orders with the most competitive specified price, in the case of buying, the best bid price, and in case of selling, the best ask price.

  During the Continuous Trading Session, the primary queue is the queue of orders with the most competitive specified price, the best bid price for buying, or in case of selling, the best ask price.

Apart from the IEP and IEV, the following market information is also disseminated during the POS, which includes: POS stock indicator, order imbalance information (direction and quantity), Reference Price, Stage 1 and Stage 2 price limits (upper and lower price limits) and Trading States during the POS.

No, the POS will either start at 9:00am or be cancelled. If there is no POS, Continuous Trading will commence as usual at 9:30am.

Input of short selling orders, as at-auction limit orders with a price not lower than the previous closing price, will be allowed in the POS for POS Securities which are Designated Securities eligible for short selling.  However, input of short selling at-auction orders will not be allowed.

In the absence of the previous closing price, input of short sell orders in the POS will be rejected.

A two-stage price limit mechanism is applied to control the price of at-auction limit orders (i.e. at-auction orders and manual transactions are not subject to these price limits) which are input during the POS.

Stage 1 price limit: applicable to the Order Input Period between 9:00am - 9:15am

The price limits are set at ±15% from the POS reference price, which is the previous closing price of a POS Security (or the adjusted closing price for POS Securities that have undergone corporate actions).

At-auction orders and at-auction limit orders within the ± 15% of the previous closing price can be entered starting from the Order Input Period.  An at-auction limit order which has a limit price outside the permissible price limit will be rejected by the OTP-C.

The Stage 1 price limits and the POS reference price are disseminated to the market via Orion Market Data Platform – Securities Market (OMD-C) before the start of the Order Input Period.

In the absence of a previous closing price (e.g. for IPO stocks) or for stocks resuming from trading suspension[1], the Stage 1 price limit checking will be not be applied for the Order Input Period.

Stage 2 price limit: applicable to the No-Cancellation Period and Random Matching Period between 9:15am - 9:22am

Starting from the No-cancellation Period, the allowable price limits will be further tightened and is set at the highest bid price and the lowest ask price recorded at the end of the Order Input Period at 9:15am.  More specifically:

Stage 2 Upper Price Limit = the higher of the highest bid price and the lowest ask price recorded at the end of the Order Input Period at 9:15am.

Stage 2 Lower Price Limit = the lower of the highest bid price and the lowest ask price recorded at the end of the Order Input Period at 9:15am.

The Stage 2 price limits will remain unchanged for the whole period of No-cancellation and Random Matching Periods and the price limits will be disseminated to the market via OMD-C at the beginning of No-cancellation Period. 

During the No-cancellation Period and Random Closing Period, the prices of newly input at-auction limit orders that aim to be executed during the POS must be between the Stage 2 Upper Price Limit and the Stage 2 Lower Price Limit since the final IEP will only be formed within the Stage 2 price limits, and no orders can be amended or cancelled. 

At this stage, in order to build an order book with deeper liquidity after the market opens, passive at-auction limit orders (i.e. buy order price lower than the Lower Price Limit and sell order price higher than the Upper Price Limit) will still be accepted provided that these orders are within ±15% from the previous closing price.  However, it should be noted that these passive orders will not be matched during the POS since their prices fall outside the range of Stage 2 Upper Price Limit and Lower Price Limit.

In case only buy orders or only sell orders exist (or both do not exist) at the end of Order Input Period at 9:15am, the Stage 2 price limits will be set at ±15% from previous closing price (i.e. same as Stage 1 price limit).

[1] For stocks resuming from a trading suspension, the Stage 1 price limit check will not be applied for the first day of trading resumption only (no matter whether there is trade recorded on the day of trade resumption or not).

In order to prevent extreme price movement during the POS for ETPs (covering ETFs and L&I Products) on their listing day, the ±15% price limit during the POS is applied to ETPs on their listing day, and the ETP’s pre-IPO net asset value per unit is used as the POS reference price for price validation.  ETP issuers is required to publish an announcement on HKEXnews indicating the ETP’s NAV by 5:00pm on the trading day before listing.

As the market is already familiar with CAS, which has been well-accepted, adopting an opening auction model that largely follows the closing auction will facilitate market participants’ understanding of the enhanced POS trading mechanisms. Internationally, it is noted that many exchanges would adopt identical or largely similar auction mechanisms for their opening and closing auctions.

BSS Users are also requested to note that if there is a severe violation of the entitled throttle limit, the corresponding OCG-C session will be dropped. Therefore, it is recommended that BSS should minimize the occurrence of message rejections byadopting below approaches:

1. Implementing a proper flow control and re-submission mechanism. To minimize the occurrence of rejections due to exceeding the throttle limit, BSS should only send the number of messages less than or equal to the entitled throttle limit. In the example above, the BSS should control that no more than 8 messages could be sent to OCG-C in a single throttle window. Any additional messages should be queued in the BSS and be sent in the next throttle window.


2. Synchronizing BSS system clock with GPS. If there is a misalignment of system clock between BSS and OCG-C, messages considered to be sent in two different throttle windows could be counted as being in the same throttle window in OCG-C. For example, the entitled throttle limit is 4, and the BSS sends 8 messages in the first window and 1 message in the next window. However, if all 9 messages arrive at OCG-C in the same throttle window based on OCG-C system clock, the last message will be rejected. Therefore, it is recommended BSS synchronizes its system clock with GPS to reduce the chance of rejection due to throttle window misalignment, and please note that some exceptional cases such as network delay variance may also cause message arrived at misaligned throttle time window and result in rejection.

Note 1:

In this example, the length of value is 2 instead of 1. It is because the length will take into account the null terminator.

Example 2:

If the Alphanumeric Variable Length field is empty/blank, the memory block will be stored as: