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- HKEX proposes new 5-tier position limit regime for single stock options and futures markets, with higher maximum position limit for single stock options
- HKEX also proposes to remove additional position limits, and revise Large Open Position reporting requirements for flagship-minis
- Consultation period open through to 30 June 2022
Hong Kong Exchanges and Clearing Limited (HKEX) today (Thursday) is pleased to publish a Consultation Paper on the proposed revision of: (1) the position limit regime for single stock options and futures; and (2) the additional position limits and Large Open Position (LOP) reporting requirements for mini-Hang Seng Index and mini-Hang Seng China Enterprises Index derivatives contracts.
The proposals, if implemented, seek to provide more capacity and flexibility for investors as they look to manage their market exposure and support HKEX’s continuing role as Asia's leading derivatives trading and risk management centre.
As set out in its proposals, HKEX plans to add two additional tiers to the existing three-tier single-stock options (SSO) position limit model, and expand the position limit of the SSOs to up to 250,000 contracts, up from 150,000 contracts in the current three-tier model. A similar five-tier model will be introduced to the single-stock futures (SSF) market, with a position limit of up to 25,000 contracts in the top tier. A tier-classification review mechanism will be put in place to account for annual adjustments and corporate actions.
Separately, HKEX also proposes to remove the additional position limits that apply to its Mini-HSI Futures and Options and Mini-HSCEI Futures and Options (collectively, flagship-minis), and standardise the Large Open Position reporting level of the flagship-minis with the standard-sized HSI and HSCEI futures and options, at 500 contracts.
HKEX Co-Chief Operating Officer and Head of Operations & Transformation John Buckley said: “At HKEX, we are committed to increasing the vibrancy and attractiveness of our markets. The proposed enhancements for the derivatives market aim to provide more flexibility to investors and to support market development, while ensuring appropriate liquidity thresholds are applied to deliver proper risk controls.”
HKEX Co-Chief Operating Officer and Co-Head of Markets Wilfred Yiu said: “The proposal is the latest in our microstructure enhancements aimed at growing the diversity of market participation. We welcome feedback from the market, as we work together to develop Hong Kong as Asia’s leading derivatives trading and risk management centre, helping us build the Marketplace of the Future.”
HKEX’s derivatives offering, as well as trading volumes, have been consistently increasing over the last few years. For its single stock derivatives contracts, SSO’s year-end open interest grew at an average annual rate of 4.7 per cent from 2016 to 2021, while SSF’s year-end open interest grew at an average annual rate of 10.0 per cent from 2011 to 2021.
A more robust and flexible position limit regime and LOP reporting requirements will help support Hong Kong’s competitiveness as an international financial centre.
Details of the proposed changes are available in the Consultation Paper published on the HKEX website. HKEX invites market feedback on its proposals during the consultation period, which closes on 30 June 2022.
