HKEX to implement volatility control mechanism enhancements in derivatives market
Hong Kong Exchanges and Clearing Limited (HKEX) today announces that it will implement enhancements to the Volatility Control Mechanism (VCM) and Pre-Opening Session (POS) in its derivatives market. The changes are set to be implemented on April 12, 2021.
The VCM is currently applied to the spot month and next calendar month contracts in the Hang Seng Index (HSI) Futures, Mini-Hang Seng Index (MHI) Futures, Hang Seng China Enterprises Index (HHI) Futures and Mini-Hang Seng China Enterprises Index (MCH) Futures, which only allows a maximum of one trigger per trading session. The enhancement will allow multiple triggers in each day trading session, to better safeguard market integrity.
In addition, a random cutoff mechanism will be introduced to the pre-opening session (POS) and the pre-open allocation session to the applicable products1 in the derivatives market for both morning and afternoon sessions. This enhancement aims to deter the possible gaming strategy of manipulating the Calculated Opening Price near the end of the auction process and also to encourage order input at an earlier stage.
To facilitate the random cutoff, the pre-opening session will be shortened by one minute while the pre-open allocation session will be extended by one minute.
Let’s note that POS is available for the trading of HSI, MHI, HHI and MCH futures contracts, MSCI Taiwan Index related futures contracts and Hang Seng TECH Index futures contracts.