HKEx Proposes Reduction In Minimum Spreads

by Mary Swire, Tax-News.com, Hong Kong

10 August 2004

Hong Kong Exchanges and Clearing Limited (HKEx) on Friday published a Consultation Paper inviting market views and comments on its proposal to reduce minimum spreads.

By cutting transaction spreads (the difference between bid and offer prices on securities), HKEx is hoping to increase the competitiveness of the bourse, whilst improving market efficiency and liquidity. The proposals would also make the spreads more uniform.

Adopting a cautious approach to the changes, HKEx is proposing to phase in the spread reductions in two stages: phase one will see spreads reduced for shares priced above HK$30; phase two will then potentially reduce spreads on shares from HK$0.25 to HK$20. Shares priced between HK$20 and HK$30 will remain unaffected by the proposals.

However, the exchange stresses that the implementation of phase two will depend on the results of phase one and responses to the changes by interested parties.

“Implementing a new scale of minimum spreads would require effort and may involve investments by different parties, therefore any decision to change should be supported by benefits and taken with care and prudence," observed HKEx Deputy Chief Operating Officer, Gerald Greiner.

“Once HKEx has received responses to this consultation, it will assess whether the market as a whole would benefit from the changes,” added Mr Greiner.

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