Hong Kong Stock Analysts Association: Support HKEX's implementation of T+1 reform, propose flexible arrangements for T+2 in extreme weather conditions.

HKEX (00388) recently published a "Consultation Document on Shortening the Settlement Cycle of the Hong Kong Stock Market," proposing to shorten the current T+2 settlement cycle to T+1, with the target implementation date set for the fourth quarter of 2027. After a detailed review of the document by the Hong Kong Society of Stock Analysts, they formally submitted their feedback today, May 13, essentially supporting the direction of the reform and proposing a supplementary suggestion regarding settlement arrangements in extreme weather conditions. The Society stated that they fully support HKEX's push to reform the settlement cycle to T+1, agreeing with the operational mode and process optimization solutions put forward in the consultation document. However, they suggested that in extreme weather conditions (such as black rainstorms or a No. 10 typhoon), where banks are forced to suspend operations, settlement should be allowed to be extended to T+2 to ensure smooth and orderly market operations. The Chairman of the Hong Kong Society of Stock Analysts, Tang Shengxing, firmly believes that the reform of the T+1 settlement cycle will inject new energy into the Hong Kong financial market, and that the flexible arrangements for extreme weather situations reflect a humane consideration of the market, striking a balance between efficiency enhancement and stability assurance. The Society has officially submitted their written response to the Stock Exchange of Hong Kong during the consultation period (ending on May 18, 2026) and urged industry players to actively participate in this consultation to jointly advance the infrastructure of the Hong Kong financial market. Specific recommendations include: 1. Principled support for reform and a practical attitude Tang Shengxing stated, "Major capital markets around the world have either adopted or are about to adopt shorter settlement cycles. As an international financial center, Hong Kong must align with the best international practices. Implementing a T+1 settlement cycle will help enhance market operation efficiency, reduce counterparty risk, and further strengthen Hong Kong's competitiveness in the financial market." The Society agrees with the operational mode and related process adjustments proposed in the consultation document, including extending the service hours of settlement-related activities, optimizing the settlement process timeline, and establishing new workflow platforms for market participants. After careful consideration, the Society agrees with the majority of the suggested arrangements in the consultation document, such as maintaining trade execution, adjusting post-trade activities to accommodate T+1 settlement, extending the service hours of settlement-related activities, maintaining the existing cash and stock delivery framework, studying new workflow platforms for institutional shareholders, and expecting a transition in the fourth quarter of 2027, urging market participants to deploy system and process upgrades early on. 2. One exception suggestion: Allowing settlement to be extended to T+2 in extreme weather conditions The Society has only one supplementary suggestion for the consultation document. Tang Shengxing stated, "Considering Hong Kong's unique weather conditions, in the event of extreme weather conditions such as the issuance of a black rainstorm warning or a No. 10 typhoon signal, which cause banks across Hong Kong to suspend operations, securities brokers may be unable to execute cash settlements or complete the fund transfers required for T+1 settlement. In this situation, we propose allowing a one-day delay in settlement for the securities market, reverting to a T+2 settlement arrangement." The reasons for this suggestion include: 1. Alleviating operational pressure on the industry: During extreme weather conditions, banks may face system disruptions, and even with the willingness to complete the required fund transfers, securities brokers may not be able to do so. Forcing T+1 settlement would result in numerous settlement errors and default risks. 2. Aligning with practical feasibility: Bank closures due to extreme weather are considered force majeure factors. Under the current system, extreme weather conditions already lead to the markets being closed; after the implementation of T+1 in the future, if banks close on a trading day due to weather reasons, the settlement process should be granted appropriate flexibility. 3. Not impacting the overall reform pace: This exception arrangement only applies to rare cases of extreme weather and will not undermine the efficiency enhancement brought about by the T+1 settlement cycle on normal trading days.