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HKEX Initiates Consultation on Cutting Minimum Stock Price Spreads in 2 Phases; 50-60% Chop in Min Spread Proposed
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To enhance market microstructure and liquidity, HKEX (00388.HK) announced that it will start consulting market opinion for the proposed reduction of minimum spreads in the Hong Kong securities market. 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, including equities, REITs, and equity warrants. In Phase 1, the proposal recommends a 50-60% reduction in the minimum spreads of price bands between $10 and $50. An additional Phase 2 will involve reducing the minimum spread for price bands between $0.5 and $10 by 50%. HKEX may consider proceeding with the implementation of Phase 2, subject to the implementation of the proposed changes in Phase 1 and a review of its impact. The bourse expected that around 300 and 1,300 applicable securities, accounting for nearly 30% and 25% 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. HKEX Deputy CEO and Co-COO Wilfred Yiu commented that reducing minimum spreads for securities in certain price ranges could help with the price discovery process and facilitate greater liquidity, allowing investors to enjoy lower overall transaction costs. AAStocks Financial News |
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