HKEX halves minimum spreads for stocks priced from HK$0.50 to HK$10 as phase 2 goes live

Phase 2 of the Stock Exchange of Hong Kong’s (SEHK) reduction in minimum spreads goes live today, Monday 3 August, moving a large part of its equity market onto a finer price grid. The Securities and Futures Commission (SFC) has approved the rule amendments, which HKEX published on 31 July in circular LSD/046/2026. The circular says the amendments come into effect today. HKEX’s 14 July circular had set 3 August as the target launch date, after an optional post-release test on Saturday 1 August.

What changed

The amended spread table in the Second Schedule to the Rules of the Exchange cuts the minimum spread from HK$0.010 to HK$0.005 for securities priced over HK$0.50 and up to HK$10.00. The existing band over HK$0.25 to HK$0.50 already traded at HK$0.005, so the two bands now form one HK$0.005 band from over HK$0.25 to HK$10.00. The spreads for prices above HK$10 are unchanged from phase 1.

Phase 1 took effect on 4 August 2025, according to HKEX’s January 2026 circular. Under HKEX’s December 2024 consultation conclusions, it cut the spread:

• from HK$0.02 to HK$0.01 for prices over HK$10 to HK$20
• from HK$0.05 to HK$0.02 for prices over HK$20 to HK$50

That January circular said an interim review of phase 1 had found “no undesirable impact” on the affected stocks. HKEX gave that finding as the basis for going ahead with phase 2.

What is in scope

Phase 2 covers the same securities as phase 1:

• equities
• real estate investment trusts (REITs)
• equity warrants and other applicable securities

Exchange-traded products, debt securities, exchange-traded options and structured products are excluded. Structured products include callable bull/bear contracts and derivative warrants.

Tick-to-price, before and after

The following figures are our own arithmetic from the spread tables. They show the tick as a share of the price at the two ends of the affected band:

Price	Old tick	Old tick as % of price	New tick	New tick as % of price
HK$0.51	HK$0.010	about 1.96%	HK$0.005	about 0.98%
HK$10.00	HK$0.010	0.10%	HK$0.005	0.05%

How HKEX ran the cutover

• Derivatives display first. Under circular CT/093/26, the derivatives market systems and the Stock Options Daily Market Report began showing underlying closing prices to three decimal places, up from two, on 13 July 2026. Order and trade prices for stock futures and stock options did not change.
• Rehearsal and test. HKEX’s market data arm told vendors on 14 July that a market rehearsal had been completed on 25 April 2026. It scheduled an optional, “highly recommended” post-release test for Saturday 1 August.
• No new feed interface. HKEX’s phase 2 FAQ says there is no interface change to the OMD-C feed. HKEX’s market data notice still told clients with an indirect OMD-C connection to “liaise closely” with their feed vendors or application service providers to ensure they were ready for the launch.

How the market voted

HKEX’s December 2024 consultation conclusions report support from:

• by number of responses: 70% for phase 1 and 64% for phase 2
• by exchange participants’ market share: 65% for phase 1 and 60% for phase 2

The exchange participants that responded together represented about 89% of market share. The market-share figures exclude those that answered “no comment”; participants representing 13% and 15% of market share opposed phases 1 and 2 respectively.

Respondents raised two main objections:

• Profits on lower-priced stocks. Some respondents, mostly market makers or retail investors, said tighter spreads on lower-priced stocks would make it harder to profit from providing liquidity or from turnaround trading. HKEX replied that stocks below HK$2 traded with tick-to-price ratios of 40 basis points or more, so active investors paid a relatively high cost to cross the spread, which it said affected trading velocity. It added that market-making and turnaround strategies built on wide spreads and queue priority “may need to be re-adjusted”.
• Throttle costs. Some institutional respondents expected more order messages and higher throttle usage and costs. They asked HKEX to review its throttle scheme if needed.

Why it matters

Analysis.

• Spreads and queues. For stocks whose spread was pinned at one HK$0.01 tick, a HK$0.005 tick lets quoted spreads tighten and spreads displayed size across more price levels. Queue position at the touch is worth less, and price improvement becomes cheaper.
• Liquidity provision. HKEX itself said strategies that rely on wide spreads and queue priority may need to change. Displayed depth at the best price is the number to watch.
• Systems load. More price levels usually mean more order amendments and more market data messages per stock. That bears on throttle usage and the cost of capacity at brokers.
• Cross-market consistency. Order and trade prices for stock futures and options are unchanged, while the underlying now trades in half-cent increments. Hedgers and pricing models have to deal with that mismatch.

What we are watching

• Any post-implementation review HKEX publishes on phase 2, and whether it repeats phase 1’s “no undesirable impact” finding.
• Changes in displayed depth and average trade size on stocks between HK$0.50 and HK$10.

Added 1 Nov 2026 to the Market Structure section; dated to the event, not published at the time.

Sources

• Rules of the Exchange: Amendments for Phase 2 of the Reduction of Minimum Spreads (LSD/046/2026), Hong Kong Exchanges and Clearing, 31 Jul 2026
• The Post Release Test and Launch of Phase 2 of Minimum Spreads Reduction (CT/104/26), Hong Kong Exchanges and Clearing, 14 Jul 2026
• Launch of Phase 2 of Minimum Spreads Reduction in Hong Kong Securities Market (MDD/26/275), HKEX Information Services, 14 Jul 2026
• The Phase 2 Implementation of Minimum Spreads Reduction and Adjustment to the Stock Options DMR (CT/093/26), Hong Kong Exchanges and Clearing, 24 Jun 2026
• Reduction of Minimum Spreads: FAQ for Phase 2, Hong Kong Exchanges and Clearing, 8 May 2026
• Implementation of Phase 2 of the Reduction of Minimum Spreads (CT/003/26), Hong Kong Exchanges and Clearing, 9 Jan 2026
• Consultation Conclusions: Review of Minimum Spreads in the Hong Kong Securities Market, Hong Kong Exchanges and Clearing, Dec 2024