Hong Kong Exchanges and Clearing Limited: Release of discussion paper on shortening the settlement cycle of the Hong Kong stock market.

HKEX today issued a discussion paper on shortening the settlement cycle of the Hong Kong stock cash market, aiming to guide the market to discuss this issue and reach a consensus with the industry on how and when to shorten the settlement cycle. The discussion on the settlement cycle in this paper is limited to the settlement of secondary market transactions in the stock cash market and does not involve the settlement of primary market transactions (such as new stock subscriptions). Since 1992, HKEX stock cash market has been using a T+2 settlement cycle, while other international stock markets have gradually shortened the settlement cycle to T+2 over the past 20 years. In recent years, many markets have shifted or are considering shifting to T+1 or even shorter settlement cycles. According to statistics from the World Federation of Exchanges and international exchanges, HKEX expects that by the end of 2027, 88% of global stock market transactions will adopt a T+1 or T+0 settlement cycle. The paper points out that transitioning to a T+1 settlement cycle in Hong Kong has both benefits and challenges. Potential benefits include improved market efficiency, reduced systemic risks, and closer alignment of the Hong Kong market with other international markets. However, transitioning to T+1 also brings challenges, especially for market participants who need to deal with time zone differences, foreign exchange conversions, and shorter settlement time windows. To adapt to these changes, market participants need to upgrade their systems, achieve process automation, and coordinate with the entire market to maintain operational efficiency and stability. Markets currently implementing a T+1 settlement include Mainland China, the United States, Canada, Mexico, Argentina, and India, with the expectation that by 2027, this will also include the European Economic Area, the United Kingdom, and Switzerland. Laura M. Cha, CEO of HKEX Group, stated that as the operator of the Hong Kong market, HKEX fully supports continuously optimizing the infrastructure of the Hong Kong financial market to ensure the financial ecosystem remains robust and up-to-date. Therefore, she is pleased to release this discussion paper, guiding the market to discuss how and when to shorten the settlement cycle of the cash market. She expressed that by guiding market discussions, they hope to gather consensus and formulate a detailed implementation timetable after fully considering market opinions. All market participants are invited to actively participate in this discussion and share their views.