HKEx to bring back closing auction
Source: Bloomberg News |
January 16, 2013, Wednesday
|
Print Edition
Print Edition
HONG Kong Exchanges and Clearing Ltd plans to reintroduce a closing auction for its cash equities market, Chief Executive Charles Li said yesterday. The world's No. 1 bourse operator by value will sell off stakes in an over-the-counter derivative clearing subsidiary.
The Hong Kong bourse operator suspended the auction in March 2009 after large moves at the end of the day spurred concerns about price manipulation. Exchanges in most countries use auctions to set closing prices by pooling share orders and finding the level at which the most can be matched.
"It is something we will absolutely do," Li said. "But it is something we will do with a lot of consultation and time spent so that people really truly understand it and at the same time the big major investors who are really dying for these services will be able to get it."
HKEx, which regained its place as the world's biggest exchange operator by market value in December, wants to be a hub for investors seeking access to China and for Chinese buying global assets.
The closing auction process, shunned only by Hong Kong and Shanghai among the 10 biggest markets worldwide, may reduce volatility and limit manipulation, according to a 2006 paper tracking the introduction of the process at Singapore's stock exchange. Hong Kong now uses the median price from the final five trades in a stock to calculate its closing level.
International brokers and institutional investors have been asking Hong Kong to reinstate the auction for certainty in attaining the closing price while local independent brokers oppose the auctions, saying they are a manipulation tool for the bigger players.
"The people who don't like closing auctions usually don't like it for the wrong reasons," Li said. "There is a strong fundamental need for this for us to have it in Hong Kong if we want to be a real international market."
The Hong Kong bourse operator suspended the auction in March 2009 after large moves at the end of the day spurred concerns about price manipulation. Exchanges in most countries use auctions to set closing prices by pooling share orders and finding the level at which the most can be matched.
"It is something we will absolutely do," Li said. "But it is something we will do with a lot of consultation and time spent so that people really truly understand it and at the same time the big major investors who are really dying for these services will be able to get it."
HKEx, which regained its place as the world's biggest exchange operator by market value in December, wants to be a hub for investors seeking access to China and for Chinese buying global assets.
The closing auction process, shunned only by Hong Kong and Shanghai among the 10 biggest markets worldwide, may reduce volatility and limit manipulation, according to a 2006 paper tracking the introduction of the process at Singapore's stock exchange. Hong Kong now uses the median price from the final five trades in a stock to calculate its closing level.
International brokers and institutional investors have been asking Hong Kong to reinstate the auction for certainty in attaining the closing price while local independent brokers oppose the auctions, saying they are a manipulation tool for the bigger players.
"The people who don't like closing auctions usually don't like it for the wrong reasons," Li said. "There is a strong fundamental need for this for us to have it in Hong Kong if we want to be a real international market."
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