HKEX tightens its '9-times' order price limit to five times from 2 November

The Stock Exchange of Hong Kong (SEHK) will reject orders priced five times or more away from the nominal price from Monday 2 November, after the Securities and Futures Commission approved changes to its trading rules, HKEX said in a circular dated 26 October.

The change tightens the “9-times rule” to a 5-times rule for all securities except structured products. Structured products keep the nine-times limit.

What changes

The amendments are to three rules in Chapter 5 of the Rules of the Exchange:

• Rule 505A (orders): a buy or sell order may not be made at a price that deviates five times or more from the nominal price, or nine times or more for a structured product.
• Rule 501I (pre-opening session): at-auction limit orders left unmatched at the end of the pre-opening session are carried into continuous trading only if their price does not deviate five times or more from the nominal price. Others are cancelled.
• Rule 503 (opening quotations): the first bid or ask of the day may not deviate five times or more from the previous close (nine times for structured products in the continuous session).

Testing and launch

An earlier HKEX circular, dated 2 October, said the end-to-end test from 15 to 30 September had been completed successfully. It set an optional practice session on Saturday 10 October and an optional post-release test on Saturday 31 October, and strongly encouraged all exchange participants to take part.

Subject to a successful post-release test, the exchange will launch the change on 2 November “without further notice”. If the test is not completed successfully, HKEX said it would issue a circular by 4pm Hong Kong time (08:00 London time) on 31 October to defer the launch.

HKEX also told participants that rely on information vendors for market data to liaise with those vendors about support for the testing.

Neither circular gives a reason for the change.

What we are watching

• Whether the 31 October post-release test passes and the change goes live on 2 November as planned, or HKEX issues a deferral circular.