.jpg)
HKEX has published a report assessing the impacts of its ETF liquidity enhancements rolled out in June 2020.
Please find the access link to the full report: http://www.hkex.com.hk/-/media/HKEX-Market/Products/Securities/Exchange-Traded-Products/Attachment/HKEX--Assessing-the-impact-of-HKEX's-ETF-liquidity-enhancements_whitepaper_en.pdf
Report Summary:
As part of our ongoing mission to position Hong Kong as Asia’s leading marketplace for Exchange Traded Funds (ETFs), HKEX rolled out two major initiatives in June 2020 to enhance the trading liquidity of Hong Kong-listed ETFs. The first was the introduction of a new set of rules requiring market makers to provide continuous two-sided quotes at greater volumes and tighter spreads. The second was a new spread table that reduced the tick size – the smallest increment in which prices are quoted – by at least 50 per cent, which in turn greatly increased the scope for bid-ask spreads to tighten.
In order to assess the impact of these measures, we examined the change in trading spreads and order books of 201 Hong Kong-listed ETFs immediately before and after our new market making obligations and spread table took effect on 1 June 2020. We found the vast majority of Hong Kong-listed ETFs experienced marked reductions in spreads, with the most significant improvements seen in liquid ETFs, Hong Kong equity ETFs, and low-priced US dollar counters.
The narrower spreads and enhanced liquidity should bolster trading of ETFs in Hong Kong and attract new issuers while helping investors diversify their portfolios and enriching their trading experience.
