Hong Kong Exchange to Reduce Minimum Spreads of Securities, REITs & Equity Warrants in Mid-2025 & 2026, Phase 1 to Reduce Spread from $0.02 to $0.01 for Securities Price Band from $10 to $20 and Reduce Spread from $0.05 to $0.02 for Securities Price Band from $20 to $50, Phase 2 to Reduce Spread from $0.01 to $0.005 for Price Band from $0.50 to $10
18th December 2024 | Hong Kong
The Hong Kong Exchange (HKEX) has announced to reduce the minimum spreads of securities, REITs & equity warrants in mid-2025 (Phase 1) & 2026 (Phase 2), with Phase 1 to reduce spread from $0.02 to $0.01 for securities price band from $10 to $20 and to reduce spread from $0.05 to $0.02 for securities price band from $20 to $50, and Phase 2 to reduce spread from $0.01 to $0.005 for price band from $0.50 to $10 (Minimum spread is the minimum price change for a stock traded on an exchange and determines the tightest bid-ask spread allowed). HKEX (17/12/24): “Hong Kong Exchanges and Clearing Limited (HKEX) is pleased to announce today (Tuesday) the conclusions to its Consultation Paper on the proposed reduction of minimum spreads in the Hong Kong securities market. HKEX received 110 non-duplicate responses from a wide spectrum of market participants. The proposals to reduce minimum spreads of equities, Real Estate Investment Trusts (REITs) and other Applicable Securities (excluding Exchange Traded Products (ETPs), debt securities, Exchange Traded Options (ETOs) and Structured Products) in two phases received support from a majority of respondents, both in terms of the total number of respondents and from the proportion of the cash market turnover that the respondents in support of the proposals represent. Having carefully considered feedback from the consultation, HKEX will proceed with its proposal to reduce minimum spreads of the Applicable Securities in two phases (see table below). In order to provide adequate preparation time, Phase 1 will be implemented in mid-2025, while Phase 2 will be implemented in mid-2026, subject to a review of Phase 1’s results. The minimum spread is the minimum price change for a stock traded on an exchange and determines the tightest bid-ask spread allowed. A reduction of minimum spreads could therefore encourage trades to be transacted in smaller sizes. To help facilitate the smooth implementation of the reduction of minimum spreads without increasing the overall market trading cost, the stock settlement fee is proposed to be restructured. The minimum and maximum components would be removed and replaced with an adjusted fee rate charged on notional value traded. The new fee structure is designed to be cost-neutral to the market as a whole, while providing a more equitable and deterministic cost structure. The proposal is under consideration by the Securities and Futures Commission. Further details will be announced in due course, subject to regulatory approval. Alongside the changes in minimum spreads, HKEX will also adjust the order input price limit and make temporary adjustments to the market making obligations for the relevant single stock options, to provide greater flexibility for order input and trading activities under the tightened spreads. The Consultation Conclusions and copies of the respondents’ submissions are available on the HKEX website. The effective dates of Phase 1 and Phase 2 will be announced in due course, subject to market readiness.”
“ Hong Kong Exchange to Reduce Minimum Spreads of Securities, REITs & Equity Warrants in Mid-2025 & 2026, Phase 1 to Reduce Spread from $0.02 to $0.01 for Securities Price Band from $10 to $20 and Reduce Spread from $0.05 to $0.02 for Securities Price Band from $20 to $50, Phase 2 to Reduce Spread from $0.01 to $0.005 for Price Band from $0.50 to $10 “
HKEX Deputy Chief Executive Officer, Co-Chief Operating Officer, and Co-Head of Markets, Wilfred Yiu: “HKEX is fully committed to elevating the depth and vibrancy of its markets, and this is reflected in the continuous rollout of new microstructure enhancements. The minimum spreads reduction is the latest effort on this journey, and we are delighted to be moving forward with this important reform that will help lower overall transaction costs and support a more efficient price discovery process. We would like to sincerely thank all our market participants and stakeholders for taking part in the consultation process; their valuable feedback and support will help contribute to the long-term competitiveness and attractiveness of Hong Kong’s markets.”
Hong Kong Exchange Releases Consultation Paper to Reduce Minimum Spreads of Securities, REITs & Equity Warrants, Phase 1 to Reduce Spread from $0.02 to $0.01 for Securities Price Band from $10 to $20 and Reduce Spread from $0.05 to $0.02 for Securities Price Band from $20 to $50, Phase 2 to Reduce Spread from $0.01 to $0.005 for Price Band from $0.50 to $10
3rd July 2024 – The Hong Kong Exchange (HKEX) has released a consultation paper to reduce minimum spreads of securities, REITs & equity warrants, with Phase 1 to reduce spread from $0.02 to $0.01 for securities price band from $10 to $20 and to reduce spread from $0.05 to $0.02 for securities price band from $20 to $50, and Phase 2 to reduce spread from $0.01 to $0.005 for price band from $0.50 to $10 (Minimum spread is the minimum price change for a stock traded on an exchange and determines the tightest bid-ask spread allowed). HKEX (28/6/24): “Hong Kong Exchanges and Clearing Limited (HKEX) is today (Friday) pleased to publish a Consultation Paper on the proposed reduction of minimum spreads in the Hong Kong securities market. The consultation period will last for 12 weeks, ending on 20 September 2024. HKEX is proposing a reduction of the minimum spreads of equities, Real Estate Investment Trusts (REITs), and equity warrants (collectively, Applicable Securities) in Hong Kong’s securities market, as part of ongoing efforts to enhance its market microstructure and liquidity. HKEX’s proposal adopts a gradual, two-phase approach to reduce the minimum spreads of selected price bands, following a holistic review of the liquidity profile of the Applicable Securities. In Phase 1, the proposal recommends a 50 to 60 per cent reduction in the minimum spreads of price bands between $10 and $50. Subject to the implementation of the proposed changes in Phase 1 and a review of its impact, HKEX may consider proceeding with the implementation of Phase 2 to reduce the minimum spread for price band between $0.5 and $10 by 50 per cent. It is expected that around 300 and 1,300 Applicable Securities, accounting for nearly 30 per cent and 25 per cent of the average daily turnover of equities, will be included in Phase 1 and 2 respectively. Minimum spread is the minimum price change for a stock traded on an exchange and determines the tightest bid-ask spread allowed. With a tighter minimum spread, investors may be able to enjoy lower overall transaction costs. The review of the minimum spread was part of basket of measures supported by The Task Force on Enhancing Stock Market Liquidity set up by the HKSAR Government last year that was aimed at enhancing market liquidity. Details of the proposed changes are available in the Consultation Paper published on the HKEX website. HKEX invites market feedback on its proposals through submitting a response to the questionnaire during the consultation period, which closes on 20 September 2024. Please also refer to the latest HKEX podcast with HKEX Head of Equities Product Development, Brian Roberts, who explains the proposed enhancements in more detail.”
HKEX Deputy CEO and Co-COO Wilfred Yiu: “At HKEX, we are always looking at ways to increase the attractiveness of Hong Kong’s capital markets as an international financial centre. We are pleased to present for consultation this proposal to reduce the minimum spreads of selected traded securities. After extensive analysis, we have found that reducing minimum spreads for securities in certain price ranges in our market could help with the price discovery process and facilitate greater liquidity. We look forward to receiving feedback from market participants on our proposal, as together we continue to deliver microstructure enhancements supporting the needs of our investors.”
Hong Kong Exchange Releases Consultation Paper to Reduce Minimum Spreads of Securities, REITs & Equity Warrants
| Phase 1 | $10.00 – $20.00 | $0.020 | $0.010 (-50%) |
| $20.00 – $50.00 | $0.050 | $0.020 (-60%) | |
| Phase 2 | $0.50 – $10.00 | $0.010 | $0.005 (-50%) |
Minimum spread is the minimum price change for a stock traded on an exchange and determines the tightest bid-ask spread allowed. With a tighter minimum spread, investors may be able to enjoy lower overall transaction costs. The review of the minimum spread was part of basket of measures supported by The Task Force on Enhancing Stock Market Liquidity set up by the HKSAR Government last year that was aimed at enhancing market liquidity. Details of the proposed changes are available in the Consultation Paper published on the HKEX website. HKEX invites market feedback on its proposals through submitting a response to the questionnaire during the consultation period, which closes on 20 September 2024. Please also refer to the latest HKEX podcast with HKEX Head of Equities Product Development, Brian Roberts, who explains the proposed enhancements in more detail.”
About HKEX – Hong Kong Exchanges and Clearing Limited (HKEX) is a publicly-traded company (HKEX Stock Code: 388) and one of the world’s leading global exchange groups, offering a range of equity, derivative, commodity, fixed income and other financial markets, products and services, including the London Metal Exchange. As a superconnector and gateway between East and West, HKEX facilitates the two-way flow of capital, ideas and dialogue between China and the rest of the world, through its pioneering Connect schemes, increasingly diversified product ecosystem and its deep, liquid and international markets. HKEX is a purpose-led organisation which, across its business and through the work of HKEX Foundation, seeks to connect, promote and progress its markets and the communities it supports for the prosperity of all.
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