HKEx Announces Plans for Revision of Stock Option Position Limit Model

HKEx publishes the conclusions on proposed revisions incorporating a series of new features for its SOPL model.

Hong Kong Exchanges and Clearing Limited (HKEx) has announced that it plans to work on revising its stock option position limit (SOPL) model.

HKEx published a consultation paper in April 2016 to seek market views on proposed revisions of its SOPL model, to align the regime more closely with international practices and to ensure the relevance of the individual position limits at HKEx in the long run. The conclusions have been published today.

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Results

The respondents were 23 exchange participants, accounting for 67 percent of the stock options turnover at HKEx, five asset management companies, five professional and industry associations, one listed company and two individuals.

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The majority of the corporate respondents and all of the individual respondents supported HKEx’s proposed revisions and agreed that they would bring Hong Kong’s SOPL regime more in line with international practice, thus enhancing the competitiveness of Hong Kong’s derivatives market.

HKEx’s Head of Markets Roger Lee said: “We were pleased to receive responses from various market segments and to receive strong support for our proposals. A revision of our stock option position limit model can not only further improve Hong Kong’s derivatives market but also enhance the competitiveness of Hong Kong as an international financial centre.”

Main Features of Revised SOPL Model

Key features of HKEx’s proposed revision of its SOPL model include a three-tier framework to address the de facto single position limit issue comprising limits of 50,000, 100,000 and 150,000 contracts based on the contract equivalent number and regularly scheduled reviews.

HKEx, which recently announced its intention to develop an industrial user base to back its metals trading hub in China, will provide the results of its consultation to the Securities and Futures Commission (SFC) and have further discussions with the SFC on its proposals prior to the adoption of the proposed revisions.

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