According to market sources today, the HKEx is initially consulting the industry on the "fuse mechanism", mainly to prevent Hong Kong from becoming a "big crocodile cash machine" and prevent it from happening.
In response, the Times reported to the Hong Kong Stock Exchange that the Hong Kong Stock Exchange had responded that it was discussing with the industry various measures to improve the market microstructure, but it is currently at a very preliminary stage.
HKEx responds to the Hong Kong version of the "fuse mechanism"
According to the Hong Kong Oriental Daily News, the Hong Kong Stock Exchange is studying the fuse mechanism and initially consulted the industry on the mechanism of the fuse mechanism. In the event of a major market crisis in Hong Kong, if the HSI falls below a certain level, is there a need to adopt a mechanism to suspend? Market transactions, including spot and futures trading, to avoid the Hong Kong market becoming a "big crocodile cash machine."
It is understood that the HKEx's "finding the bottom" to the industry is not an expectation of a market crisis in Hong Kong. The most important thing is to prevent problems before they occur. It is not necessary to implement the relevant mechanism in Hong Kong.
In this regard, the Times reported to the Hong Kong Stock Exchange for the first time. The Hong Kong Stock Exchange officially responded that the HKEx has been closely communicating with the industry to explore various measures to improve the market microstructure. However, these discussions are currently at a very preliminary stage. The HKEx will also work closely with the industry to safeguard The long-term healthy development of the market will enhance Hong Kong's competitiveness as an international financial centre. Judging from the response of the Hong Kong Stock Exchange, the attitude is ambiguous and neither denied nor recognized.
As early as 2016, the HKEx introduced two market structure reform measures:One is the market volatility adjustment mechanism (referred to as the “market adjustment mechanism”), and the other is the closing auction trading period.The market adjustment mechanism aims to alleviate extreme price fluctuations caused by automated transactions, such as “flash crashes” and “procedural errors”, which may pose a threat to market operations and control the systemic risks arising from the interconnection between Hong Kong securities and derivatives markets. In particular, the risk of the benchmark index product is provided and a short cooling-off period is provided to allow the transaction to take place within the specified price limits during the cooling-off period.
The above-mentioned market adjustment mechanism is only applicable to individual stocks, that is, the HSI and the H-Share Index constituent stocks (the existing 81 stocks) and the related index futures contracts (the existing 8 stocks) have risen or fallen by 10% within 5 minutes. Entering the 5-minute "cooling-off period", the transaction is limited to the specified price range, and the normal transaction will be restarted thereafter.
So, when are the market adjustment mechanisms applicable? According to the website of the Hong Kong Stock Exchange, the monitoring of the market mechanism is applicable to the continuous trading hours, except for the following:
1. The first 15 minutes of the morning market and the afternoon market;
2. The last 20 minutes of the luncheon;
3. The post-closing futures trading period of the derivatives market.
However, since the launch of the market adjustment mechanism in July 2016, the securities and derivatives markets have not yet triggered a “cooling-off period” record.
Different markets in the world have different market mechanisms
At present, almost all major markets in the world have different forms of market volatility adjustment mechanism to control extreme price volatility. At present, there are no “fuse mechanisms” in major markets in the Asia Pacific region, such as Hong Kong and Australia, if other major markets are in extreme fluctuations. Under the "stopping the market", only Hong Kong will continue to "open the market", and it is likely to become "the target of the attack of predators."
According to the data, the "fuse mechanism" in the United States is a three-tier system:When the S&P 500 index fell 7% and 13% from the previous trading day, the stock market was suspended for 15 minutes. When it fell 20%, the day's trading stopped. The Mainland also launched a "fuse mechanism" in January 2016. Based on the CSI 300 Index, if the price is more than 5% and 7%, the trading will be suspended for 15 minutes or the whole day will be closed, but the implementation will be short for 4 trading days. It was cancelled.
The Times has interviewed several investment bankers in Hong Kong. They believe that this mechanism may harm the interests of retail investors or brokers. Not every stock is suitable for the fuse mechanism. Hong Kong has many small-cap stocks, and major shareholders are likely to pledge stocks. There are also some stocks with insufficient liquidity, such as frequent plunge. If the fuse mechanism is triggered, some small investors will not be able to throw the stocks they hold, and the brokers will not be able to “snap”.
Unlike the A-share trading system, A-shares have a 10% upside limit. ST stocks have a 5% limit. Hong Kong stocks have no ups and downs. In Hong Kong stocks, stocks that have skyrocketed or plummeted more than 30% are often appear.
Just today, Hong Kong stocks plusJiayi Holdings(1025.HK) fell as much as 80%, and the stock plummeted from HK$5.28. At the close, it fell by 75.29% to HK$1.26.Jiayi HoldingsIt was listed on February 28 this year. The stock price rose more than 44% on the second day of the listing. The third day rose by 67.97%. Since the listing ended on May 14, the stock price has soared by 420.41. However, it only takes one day to return to the starting price. ".
However, some analysts believe that if Hong Kong follows the US practice, when the main index falls by 20% on the day, it will require the HSI to drop nearly 6,000 points a day. This situation is very rare, and the “fuse mechanism” suitable for Hong Kong stocks will be arranged in advance. "Preventing problems before they happen is also a perfection to the market."
(Article source: Securities Times Network)