- HKEX sets out proposals for its securities and derivatives markets, including Stock Connect, derivatives holiday trading, and afterhours trading, to be open during severe weather conditions
- Trading, post-trade and listing arrangements to be substantially the same as those on regular trading days, with necessary adjustments made to accommodate closure of physical outlets
- Banks in Hong Kong to provide relevant online banking services, supporting market participants and market operations during severe weather conditions
- Eight-week consultation period ends on 26 January 2024
Hong Kong Exchanges and Clearing Limited (HKEX) today (Thursday) published a Consultation Paper on the proposed operational model and related arrangements for Hong Kong's securities and derivatives markets, for them to remain operational during severe weather conditions1. The consultation will last for eight weeks, ending on 26 January 2024.
HKEX Chief Executive Officer Nicolas Aguzin said: "Hong Kong is a major global financial market, as well as being the go-to global risk management and asset allocation centre for the region. It is our belief, therefore, that it is essential that Hong Kong's markets must always be available to investors regionally and internationally during regular trading hours. This will ensure that they can continue to manage their portfolios and corresponding risks, especially when other underlying markets are also open. There is proven trusted technology in place to facilitate safe, secure and seamless operations remotely, so it is now time to bring the market in-line with global peers."
"With the support of the HKSAR Government and Hong Kong's financial regulators, I am therefore very pleased today to be presenting for public consultation a proposed model that will enable Hong Kong's markets to remain open during severe weather conditions."
"This reflects HKEX's commitment to supporting the continued resilience and attractiveness of Hong Kong as one of the world's premier financial centres, offering a broad and diverse suite of products and platforms to investors all over the world. Of course, personnel safety remains a key consideration in our proposal – and we encourage market participants to work remotely where possible during severe weather events, where at all possible."
Mr Aguzin added: "Your feedback will be vital to us, as we work with the HKSAR Government and other stakeholders to shape the final operational model and arrangements so that they are fit for purpose, ensuring Hong Kong's role as tomorrow leading IFC."
Currently, market operation arrangements around severe weather events are linked to the severity of typhoon, rainstorm or "Extreme Conditions" warnings issued by Hong Kong local authorities. Since 2018, severe weather events have resulted in 11 instances of market-wide trading suspensions, four of which took place in 2023. These trading suspensions last between several hours and a full trading day.
Under HKEX's proposals, severe weather conditions will no longer have automatic consequential impact on the continuity of trading. HKEX intends for its securities and derivatives markets, including Southbound and Northbound Stock Connect, derivatives holiday trading and afterhours trading, to be open and available to all local, regional and international investors during severe weather conditions.
During a severe weather event, the trading, post-trade and listing arrangements will be substantially the same as those during regular trading days, with some necessary adjustments needed to ensure the market’s operational resilience, and the safety of market participants, as the provision of some services provided via physical outlets would be unavailable.
For example, a buy-in exemption may be granted to Clearing Participants who are unable to deposit physical securities to HKEX's clearing house for settlement purposes under severe weather conditions. In addition, it is proposed that the last registration date for some corporate actions be postponed if that day falls on a severe weather event, as participation in corporate actions by physical certificate holders would be impacted due to the closure of physical outlets including those of share registrars. HKEX also intends to make appropriate announcements on its website and systems to alert participants and investors that, whilst a severe weather event is taking place in Hong Kong, market trading remains normal, with alternative arrangements in place for certain functions.
HKEX, along with the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA), and with the support of the HKSAR Government, formed a Severe Weather Trading Task Force (Task Force) in 2023 to solicit industry views for trading under severe weather conditions and to engage in discussions beyond trading arrangements. The Task Force consisted of a broad group of stakeholders that also included financial institutions and market participants, and their input was vital in the development of the proposed operational model.
In working with the Task Force, the Hong Kong Association of Banks and the Hong Kong Interbank Clearing Limited have confirmed that, during a severe weather event, relevant banking services, such as e-cheque clearance and electronic money transfer channels, will be available from the designated banks and settlement banks of relevant clearing houses of HKEX, to fully support Clearing Participants' operations and money settlement requirements.
HKEX's trading, clearing, settlement and market data systems will be accessible via remote networks during a severe weather event. HKEX has made enhancements to its infrastructure and operational parameters to reduce the need for physical access and will continue to work with market participants as well as consider arranging testing sessions to facilitate market participants' readiness for severe weather trading.
HKEX invites market participants to share their feedback and suggestions during the consultation period. The deadline for responding to the Consultation Paper is 26 January 2024. Interested parties are encouraged to respond to the Consultation Paper by completing and submitting the questionnaire.
Please also refer to the latest HKEX podcast with HKEX Co-Chief Operating Officer & Head of Equities, Wilfred Yiu, on the significance of these proposals to the development of Hong Kong's markets.
Note 1:
Under the existing arrangements, an issuance of Typhoon Signal No.8 or above, or a Black Rainstorm Warning by the Hong Kong Observatory, or an announcement of "Extreme Conditions" by the HKSAR Government, could lead to delayed market opening or suspension of trading, clearing and settlement services.
