LCQ6: Trading hours of Hong Kong stock exchange market

     Following is a question by Dr Hon Pan Pey-chyou and a reply by the Acting Secretary for Financial Services and the Treasury, Ms Julia Leung, in the Legislative Council today (February 29):


     After the Hong Kong Exchanges and Clearing Limited (HKEx) implemented the first phase of the extension of trading hours of the securities market last year, HKEx has planned to take forward the second phase trading hour extension as from March 5, 2012 in which the lunch break will be further shortened from one and a half hours to one hour.  Quite a number of workers unions and practitioners of the trade have expressed their dissatisfaction with such an arrangement and request HKEx to maintain a lunch break of one and a half hours.  However, HKEx has brushed aside the request and will implement the second phase of trading hour extension in March as planned.  In this connection, will the Government inform this Council:

(a) whether it knows if HKEx has proactively held discussions with the trade before it implements the second phase of the plan to understand the difficulties the trade will encounter upon the further shortening of the lunch break; if it has, what the difficulties are; if not, the reasons for that;
(b) whether the Financial Services and the Treasury Bureau and the Securities and Futures Commission have assessed the impact of HKEx shortening the lunch break on the practitioners of the trade, and whether the relevant supporting facilities are sufficient; if such assessment has been made, of the outcome; and

(c) given that according to the consultation conclusions published by HKEx in November 2010, there were in fact more members of the trade supporting the plan to shorten the lunch break to one and a half hours, plus the fact that quite a number of practitioners now object to further shortening the lunch break, whether the authorities will require HKEx to temporarily suspend the plan and consider other options (e.g. opening the market earlier and closing the market later, etc.) to replace the decision of shortening the lunch break to one hour; if they will not, of the reasons?



(a) The Hong Kong Exchanges and Clearing Limited (HKEx) conducted a public consultation in September 2010 on the extension of trading hours. We understood that the Chief Executive of HKEx met the representatives of seven securities industry associations (including the industry associations representing frontline staff and other market practitioners) to discuss the relevant proposal and collect their views. HKEx received a total of 556 submissions to the consultation paper from Exchange Participants, brokerage industry associations, listed companies and a related association, professional bodies, a banking industry association, other entities and individuals (including employees of brokerage firms) etc. Most respondents of organisations and market practitioners supported the shortening of the lunch break, but responses were mixed with advocates for one-hour lunch break and one and a half hours lunch break. As regards responses from individuals, a comparatively large number of respondents did not support the shortening of the lunch break. On the other hand, some respondents proposed eliminating the lunch break altogether or suggested no change should be made.

     HKEx maintains regular contact with industry associations and market practitioners to hear their views about Hong Kong market, including their views on the extension of trading hours. Recently, HKEx met with the industry representatives on January 12, 2012 and February 9, 2012 respectively to exchange views on the arrangement of the extension of trading hours. In general, the views collected by HKEx in these different meetings were similar to those received during the public consultation period. Regarding the difficulties brought by the further reduction of lunch break, some market practitioners expressed that this would affect their use of lunch break to contact clients.

(b) HKEx in its 2010 consultation paper set out the benefits of extending trading hours to Hong Kong's overall market and its implications for market practitioners. The consultation conclusions paper also showed that among the responses from Exchange Participants, brokerage industry associations, banks, professional bodies and listed companies, the majority of market practitioners supported the shortening of lunch break, but among the responses from employees of brokerage firms, most of them did not support the proposal. In reviewing and approving the rules relating to HKEx's proposal of extending trading hours, the Securities and Futures Commission (SFC) has taken into account the results of HKEx's market consultation, which include the comments from market practitioners, and the impact brought about by the extension of trading hours to the development of Hong Kong's overall market.

(c) As the international financial centre of China, the securities market of Hong Kong is closely connected to the Mainland's. Almost 60% of our market capitalisation and over 70% of our market turnover come from Mainland-related securities, while growing numbers of our derivative products, Exchange Traded Funds (ETFs) and structured products have Mainland-related securities as underlying assets. With the further opening up of the Mainland market and Hong Kong serving as an offshore Renminbi centre, inter-market trading activities and the number of products cross-listed between the Hong Kong and Mainland markets are poised to increase. In view of the increasing importance of the Mainland financial market as well as the closer interconnections between the Hong Kong and Mainland, the extension of trading hours can allow the trading hours of our market to overlap squarely with those of the Mainland's. This would help investors respond to market news, improve the price discovery function for Mainland-related securities traded in Hong Kong market, and promote the development of cross-market products.

     On the other hand, the extension of trading hours will help the Hong Kong market enhance its competitiveness by narrowing the gaps between its trading hours and those of its regional competitors. The SFC notes that it is a global trend to shorten and remove the lunch break in the securities markets. For instance, the exchanges in Taiwan, South Korea and Australia do not have any lunch break. Singapore Exchange has already removed their lunch break since August last year, while the Tokyo Stock Exchange has shortened their lunch break to one hour since November last year.

     In addition, considering that the shortening of lunch break to one hour may bring inconveniences to frontline staff, the relevant changes are implemented in two phases with a 1-year transitional period, so as to facilitate market practitioners to adjust to the revised trading schedule. The first phase was implemented since March 7 last year. The lunch break has been shortened from two to one and a half hours, in addition to the earlier opening of the morning continuous trading session by 30 minutes. The lunch break will be further shortened to one hour starting from March 5 this year when the second phase commenced. The SFC considers that the arrangement of trading hours extension has provided time for the industry to adjust to and prepare for the changes, and the latest arrangement on the trading hours are important to enhancing the competitiveness of the Hong Kong market.

Ends/Wednesday, February 29, 2012
Issued at HKT 18:00