Primary Market Maker Program

There are three types of market makers in HKEX's options market:
- Primary Market Maker (PMM);
- Market maker providing continuous quotes (CQMM); and
- Market maker responding to quote request (QRMM).

PMM is available to Hang Seng Index (HSI) Options, Hang Seng China Enterprises Index (HHI) Options, Hang Seng Tech Index (HTI) Options and selected stock options classes. PMM is required to provide continuous quotes (CQ) and also responds to quote requests (QR).

HSI, HHI and HTI Options PMM Program

HSI, HHI and HTI Options PMM is required to:

•       provide CQ in not less than 100 option series (See Table 1A for details); and

•       respond to at least 70% of QR issued for all short-dated expiry months (See Table 1B for details)

Obligations in terms of quote size, bid/ask spread and the percentage of trading hours to provide CQ are pre-determined. (See Table 1C).

For the list of HSI, HHI and HTI options PMM, please refer to:

http://www.hkex.com.hk/eng/prod/drprod/hkifo/RTlist_equityindex.htm

Obligations

Table 1A -  CQ Obligations (For HSI, HHI & HTI Options)

 
Table 1C – Obligations determined by bidding (For HSI & HHI Options)

Table 1D – Obligations determined by bidding (For HTI Options)

Incentives

1.  Upon fulfillment of obligations, PMM will pay:

(i)   a discounted trading fee for each HSI Options, HHI Options and HTI Options contract traded by PMM:  

Note 1: 

The Exchange is now offering market-wide 50% trading fee discount (i.e. HKD 2.5 per contract) for HSTECH options.

(ii)  a discounted trading fee on transactions effected in other Stock Index Futures and Stock Index Options products with the same underlying index, provided that the number of contracts that are eligible for a discounted trading fee in any calendar month should not exceed the volume of the HSI Options, HHI Options and HTI Options traded by the PMM in that calendar month (adjusted to equivalent contract size in the respective products). For details, please refer to the Chapter 3 of Trading Procedures for Stock Index Futures and Stock Index Options of the HKFE Rules.

2.   PMM may apply to the Exchange for a waiver of the monthly sub-license fee for up to 16 OMnet Application Programming Interface (OAPI) connections (i.e. $2,600 per month per connection or equivalent) to HKATS for HSI Options PMM, up to 8 OAPI connections to HKATS for HHI Options PMM and up to 8 OAPI connections to HKATS for HTI Options PMM

3.   PMM may apply to the Exchange for additional throughput with mass quote (MQ) function and Market Maker Protection function:

Stock Options PMM Program 

  Stock Options PMM is required to:

•       provide CQ in not less than 150 option series (See Table 2A for details); and

•       respond to at least 80% of QR issued for all expiry months (See Table 2B for details)

Obligations in terms of quote size, bid/ask spread and the percentage of trading hours to provide CQ are pre-determined. (See Table 2C).

For the list of stock options PMM, please refer to: 

http://www.hkex.com.hk/eng/prod/drprod/hkifo/RTlist_stockoptions.htm

Obligations 

Table 2A - CQ Obligations

Table 2B - QR Obligations

Note: Notwithstanding the above, the Exchange may review the spread group (Group A or B) of each option class on

monthly basis to reflect the change in the market conditions.  

In addition,  for option classes with min. price fluctuation of HK$0.01, PMM will not be obliged to quote a spread narrower
than the followings: 

 For option classes with minimum price fluctuation of HK$0.001, PMM will not be obliged to quote a spread narrower
than $0.03. 

In addition, PMM will not be obliged to quote for the bid side in response to a QR for a far out-of-the-money Contract
which has a value near zero.  A PMM shall remain obliged to quote for the sell side by issuing a sell limit order with
a limit price no greater than 10 and 30 minimum price fluctuations in option classes with minimum price fluctuations
of HK$0.01 and HK$0.001 respectively within the required response time and for the minimum required quantity and duration.  

Incentives

 1.    Upon fulfillment of obligations, PMM will pay a discounted trading fee for each options contracts traded by PMM:

2.  PMM may apply to the Exchange for a waiver of the monthly sub-license fee for up to 2 OAPI connections (i.e. $2,600 
     per month per connection or equivalent) to HKATS for each option class.

3.   PMM may apply to the Exchange for additional throughput with mass quote (MQ) function and Market Maker Protection
      function:

4.  For each option class, PMM shall entitle to a wavier of one-off fee for applying for an increase in the Central Gateway throughput rate by one standard Central Gateway throttle rate.