Wed. Jan 27th, 2021

Regulation HK

Financial Regulator

HKEX Outlines Derivatives Market Enhancements for 2021

2 min read

Market participants who plan to trade or clear selected derivatives contracts during Hong Kong public holidays will be asked to demonstrate technical readiness. 

HKEX (Hong Kong Exchanges and Clearing) has advised market participants that they will need to ensure technical readiness for the implementation of trading and clearing of selected derivatives products during Hong Kong public holidays.

Market participants who plan to trade or clear selected derivatives contracts during Hong Kong public holidays are “required” to participate in a market rehearsal and/or practice sessions to verify and declare their operational and system readiness, the bourse operator said in a circular.

Holiday trading is expected to be implemented in 2021, subject to regulatory approval and market readiness. More details on the arrangement will be announced in due course. The initiative is expected to extend to all of HKEX’s MSCI derivatives contracts.

HKEX also plans to implement the next phases of Volatility Control Mechanism (VCM) and Pre-opening Session (POS) enhancements in Q1 2021. These enhancements were finalised in December 2019.

  • For the VCM, the next phase is to implement multiple triggers for each trading session. The initial VCM enhancements was implemented in April.
  • For the POS, a random cutoff mechanism will be introduced to deter price manipulation near the end of the auction process. The initial POS enhancements were implemented in October.

HKEX said it plans to allow clearing participants to directly submit requests for external position transfer or position re-opening through DCASS Online in Q2 2021. Currently, clearing participants are required to submit duly completed and signed forms to process such position adjustments.

In addition, HKEX is upgrading its derivatives trading infrastructure and relocating its backup data centre in Q1 2021, in order to “cope with market needs and business developments”. To ensure business continuity after the upgrade, market participants are “strongly advised” to participate in the rehearsal scheduled in Q1 2021, it said.

Later in 2021, HKEX plans to install two additional matching engines, arrange a market rehearsal for emergency situations, and enhance the existing pre-trade risk management tools to allow participants to calibrate exposure limits over specified time frames.

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