HKEX suggests optimizing the trading unit framework to improve market efficiency and participation.

On December 18, HKEX issued a consultation paper today, seeking market opinions on proposals to optimize the trading unit framework of the Hong Kong securities market in order to enhance trading, clearing, and settlement efficiency. The consultation will last for 12 weeks and will end on March 12, 2026. The main proposals include: 1. There are eight different trading unit sizes for issuers to choose from: 1 share, 50 shares, 100 shares, 500 shares, 1,000 shares, 2,000 shares, 5,000 shares, and 10,000 shares. If the relevant proposals are implemented, it is estimated that about 25% of issuers will need to adjust their trading unit sizes. 2. Due to the decreased execution costs of current trading, the lower limit of the trading unit value will be halved from the current HKD 2,000 to HKD 1,000, and an upper limit of HKD 50,000 will be added for issuers using a trading unit size greater than 100 shares. The main proposals are as follows: Standardized Trading Unit Sizes There are eight trading unit sizes for issuers to choose from: 1 share, 50 shares, 100 shares, 500 shares, 1,000 shares, 2,000 shares, 5,000 shares, and 10,000 shares. Standardized trading unit sizes aim to provide choices for issuers in different price ranges, while reducing the impact on issuers and minimizing the creation of odd lots. If the relevant proposals are implemented, it is estimated that about 25% of issuers will need to adjust their trading unit sizes. Lower and Upper Limits of Trading Unit Value The trading unit value guidelines ensure that there will be no "negative value trading" (i.e. trading execution costs exceeding the trading value) due to a too low trading unit value, nor will there be difficulty for investors to participate due to a too high trading unit value. Due to the decreased execution costs of current trading, the lower limit of the trading unit value will be halved from the current HKD 2,000 to HKD 1,000. For issuers using a trading unit size greater than 100 shares, an upper limit of HKD 50,000 will be added for trading unit value guidelines. Implementation Arrangements The new trading unit framework will be implemented in phases to ensure a smooth market transition. In the first phase, new issuers listing will need to choose standardized trading unit sizes and comply with the trading unit value guidelines, while existing issuers will need to comply with the revised trading unit value guidelines. In the second phase, existing issuers will transition to choosing one of the standardized trading unit sizes within a specified time after the implementation of the paperless securities market. The reform of the trading unit framework aligns with the implementation timing of the paperless securities market to avoid issuers having to print paper stock certificates after changing the trading unit sizes, ensuring a smooth market transition, improving operational efficiency, and reducing disruptions to the market. HKEX will announce further details of other transition arrangements at a later date. At the same time, HKEX is also studying the optimization of odd lot trading mechanisms to enhance trading efficiency after the reform of the trading unit framework, and details will be announced in due course. HKEX's Market Chief Albert Yu said, "We have always been committed to enhancing market vibrancy and trading efficiency, so we are pleased to propose consultation suggestions on simplifying the trading unit framework today. These proposals aim to streamline trading operations, attract more investors to participate in trading, while also taking into account the needs and characteristics of the Hong Kong financial market. By reducing the types of trading unit sizes from over 40 to eight, it will not only help streamline trading and operational procedures but also retain flexibility for issuers and support our gradual move towards the long-term goal of a unified trading unit size. We invite feedback and comments from all sectors of the market on these proposals and look forward to working together to strengthen Hong Kong's position as a leading international financial center."