HKEx Introduces Pre-market Opening Period for H-shares Index Futures

Market Operations

04 Dec 2006

Hong Kong Exchanges and Clearing Limited (HKEx) will introduce a pre-market opening period in its H-shares Index Futures market on 8 January 2007 (Monday) to support orderly market opens and further increase market efficiency.

The pre-market opening procedures for HKEx’s Hang Seng Index Futures and Mini-Hang Seng Index Futures markets, which have had a pre-market opening period since 2000, will apply to the H-shares Index Futures market.

The current trading hours for H-shares Index Futures and the trading hours from 8 January 2007 are in the table below:

H-shares Index Futures Trading Hours

	Pre-market Opening Period	Morning Session	Pre-market Opening Period	Afternoon Session^#
Current	Not Applicable	9:45 am - 12:30 pm	Not Applicable	2:30 pm - 4:15 pm
From 8 January 2007	9:15 am - 9:45 am*	9:45 am - 12:30 pm*	2:00 pm - 2:30 pm*	2:30 pm - 4:15 pm*

^# Trading Hours on Last Trading Day (Spot Month Contract): 2:30 pm – 4:00 pm

* Current trading hours for Hang Seng Index Futures and Mini-Hang Seng Index Futures

In the first eleven months of this year, H-shares Index Futures volume was up 140 per cent from the same period in 2005. In addition, daily volume reached an all-time high of 77,773 contracts on 28 November.

Below is an overview of the pre-market opening period. The information is also available on the HKEx website.

Pre-Market Opening Period

The pre-market opening mechanism serves to establish an orderly market open and greatly enhances market efficiency. During the pre-market opening period, the calculated opening prices (COP) are established before the market open without matching orders. At present, the pre-market opening is only available for the trading of Hang-Seng Index-related futures contracts.

The following three trading sessions make up the pre-market opening period:

Pre-Opening	For auction orders, limit orders and inactive orders only Orders may be modified and cancelled Unfilled and unexpired orders from the previous day are included Combination series will not be included in this session Continuous update of the Calculated Opening Price (COP) once it is determined Both limit orders and auction orders can affect the COP
Pre-Open Allocation	For auction orders and inactive orders only No activation of inactive orders, order modification or cancellation Only new auction orders can affect the COP Bulletin Board and combination orders are not allowed
Open Allocation	No input, modification or cancellation of auction orders or limit orders Input of inactive orders allowed Orders will be matched in order type, price and time priority at the COP at the end of the session Unmatched auction orders will be converted into limit orders at the COP Unmatched limit orders will be converted to normal limit orders Users are not able to change or delete orders for two minutes during the Open Allocation session

Calculation of COP

The COP is calculated every time an order is placed in the market and it will be displayed in the "EP" column of the Price Information Window. The COP is calculated according to the rules defined below:

1.	The COP cannot fall outside the best bid and offer of unfilled orders, though it can be equal to the bid or offer;
2.	If more than one price satisfy rules 1 above, the COP will be the price with the number of matched contracts is maximised;
3.	If more than one price satisfy the rules 1 & 2 above, the COP will be the price at which the normal order imbalance is the lowest;
4.	If more than one price satisfy the rules 1 - 3 above, the COP will be the price at which the associated crossed quantity is the highest;
5.	If more than one price satisfy 1 - 4 above, the COP will be the price closest to the settlement price of previous trading section;
6.	If more than one price satisfies 1 - 5 above or if no settlement price is defined, the highest price will be chosen.

Updated 04 Dec 2006