Hong Kong Exchanges and Clearing (HKEX), which operates Asia’s third-largest stock market, will reduce the minimum trading spread for about 300 stocks starting Monday, a move aimed at lowering transaction costs and increasing turnover.
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“The minimum spread is the minimum price change for a stock traded on an exchange and determines the tightest bid-ask spread allowed,” the HKEX said in the conclusion of its consultation on the spread reform. “A reduction of minimum spreads could therefore encourage trades to be transacted in smaller sizes.”
The reform is part of the Hong Kong government’s initiative to encourage the HKEX to enhance market infrastructure, lower transaction costs, and attract more international investors, thereby strengthening the city’s status as an international financial centre.
From Monday, the minimum spreads for stocks priced between HK$10 (US$1.27) and HK$20 will be halved to HK$0.01. Stocks priced from HK$20 to HK$50 will see their minimum spreads cut by 60 per cent, from HK$0.05 to HK$0.02.
As of Friday, about 300 stocks, exchange-traded funds, and real estate investment trusts (REITs) were trading between HK$10 and HK$50, representing about 30 per cent of average daily turnover, according to exchange data.
“After narrowing the trading spread, the cost for investors will decrease, encouraging more of them to trade in the local stock market to help boost turnover further,” said Robert Lee Wai-wang, lawmaker and chairman of Hong Kong-based Grand Finance Group.
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