HKEX Defers Rollout of Anti-Volatility Mechanism to Later Date

Hong Kong Exchanges and Clearing Limited (HKEX) today announced it will not put into place its Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad Read this Term Control Mechanism (VCM) – a measure designed to cool the market when there are abrupt price changes on some derivatives - which was scheduled to launch for Monday’s session.

HKEX deferred the rollout to a date to be determined later after fixing a technical bug related to certain Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term Participants (EPs) that did not occur in the previous system tests.

HKEX had originally proposed its VCM in a past consultation paper after the G20 and the International Organization of Securities Commissions collectively issued guidance on the release and presence of more control mechanisms across trading venues.

The fine-tuned features of HKEX’s 'circuit breaker' will prevent price volatility arising from major trading errors and other unusual incidents such as a flash crash or algorithm errors.

The move will bring Hong Kong more closely in line with other major and regional markets that have implemented some form of VCM. But HKEX’s VCM is not expected to be triggered often, nor is it the sort of market-wide circuit breaker, since the mechanism stipulates a maximum of one trigger per instrument in the morning and afternoon trading sessions within a day.

Instead, if the price deviates more than a predefined percentage within a specific time frame, it will trigger a cooling-off period for five minutes to allow market participants to reassess their strategies.

Commenting on the decision, the exchange said in a statement: “After careful consideration, HKEX decided that it will be prudent to conduct more tests to resolve the specific issue and defer the implementation of VCM in the derivatives market. The decision will not have any impact on the market's operations. HKEX has informed the Securities and Futures Commission of its decision.”