Joseph Chan: "T+1" settlement for Hong Kong stocks helps reduce market settlement risk, consolidate and enhance Hong Kong's status as an international financial centre.

HKEX published a consultation paper in April this year proposing to shorten the settlement cycle of the Hong Kong cash equities market from the current "T+2" to "T+1", with implementation expected as early as the fourth quarter of 2027. "A shorter settlement cycle helps enhance the capital efficiency of market participants and reduce the associated market settlement risk." Joseph Chan, Acting Secretary for Financial Services and the Treasury, said in a written reply to a lawmaker's question at a Legislative Council meeting that promoting the adoption of the T+1 settlement cycle in the cash equities market is an important part of optimising market infrastructure, aligning Hong Kong's settlement cycle with international trends, facilitating the smooth flow of capital with overseas markets, and helping to further consolidate and enhance Hong Kong's status and positioning as an international financial centre. Joseph Chan pointed out that shortening the settlement cycle involves adjusting the market's settlement process and existing infrastructure. When formulating the implementation plan, HKEX will give priority to ensuring a robust transition for the market, and the relevant operating model will also take into account the actual circumstances of the local industry. Given that the post-trade processing time will be shortened, HKEX also proposes to extend the service hours for settlement instruction activities (such as input and matching of settlement instructions), enabling participants to handle the relevant procedures more flexibly. At the same time, HKEX proposes to retain the existing delivery versus payment arrangements, the multi-batch settlement processing architecture and the settlement risk management framework, thereby reducing the transition costs for the industry. Joseph Chan said that to ensure Hong Kong can move towards T+1 in a robust and smooth manner, HKEX will, when setting the implementation timetable, fully take into account the actual needs of the industry (especially small and medium-sized securities firms) in terms of system upgrades and process adjustments, and will allow sufficient preparation time to ensure that all market parties can connect in an orderly manner. HKEX will continue to maintain communication with the industry to understand the readiness and actual needs of different market participants, and will assist market participants in getting ready and support a smooth transition to the T+1 settlement cycle through the phased release of information papers, the provision of sufficient preparation and testing time, facilitating the industry in formulating industry guidelines, and promoting standardisation measures. Joseph Chan continued that shortening the settlement cycle from T+2 to T+1 will enhance capital turnover efficiency, with funds from sell trades recoverable one business day earlier, making it more convenient for institutional and retail investors to conduct subsequent investments more flexibly and swiftly. To ensure that retail investors can fully grasp the operational arrangements of T+1, the Hong Kong Government will promote efforts by HKEX and the Investor and Financial Education Council to strengthen public education targeting retail investors. HKEX will provide comprehensive implementation support to the market, publishing relevant information papers and implementation arrangements through a dedicated T+1 webpage. HKEX will also continue to maintain close communication with the market through briefings, industry engagement activities and systematic testing, helping market participants to prepare well in advance.