Exchange seeks banks' view on longer trading

PUBLISHED : Monday, 04 February, 2002, 12:00am
UPDATED : Monday, 04 February, 2002, 12:00am

Hong Kong Exchanges and Clearing is consulting banking representatives on its plan to extend share-trading from four hours to seven, according to an exchange source.

The trading day now runs from 10am to 4pm with a two-hour lunch break. The exchange wants it to run from 10am to 6pm with a one-hour break.

The proposed extension aims to increase activity on the market, whose turnover dropped 33 per cent last year, and make it more competitive with regional counterparts that have longer trading days.

Sources said the exchange was already in talks with banks on how to mitigate risks associated with the new hours, particularly for brokers managing margin accounts.

Margin accounts represent money that brokers lend to clients. Margin calls are usually triggered when the value of a client's shares falls below a certain level, usually about 70 per cent for smaller stocks and up to 40 or 50 per cent for blue chips. Clients can meet margin calls either by depositing more money with brokers or selling shares.

Under the proposal, the risk is that if a margin call is triggered between 5pm and 6pm, clients will be unable to deposit money with brokers because banks will be shut.

Brokers were believed to be lobbying the exchange to extend trading hours to 5pm so that the market would close at the same time as banks.

However, an exchange source said the organisation still preferred extending trading hours to 6pm for more overlap with the London stock market, which opens at 4.30pm Hong Kong time.

Sources said the exchange would announce a decision within two months. However, the new trading hours were expected to come into effect by mid-year to allow brokers time to prepare, they said.

The exchange once proposed trade from 10am to 6pm without a lunch break, with an evening trading session from 8pm to 11pm. It later dropped the evening trade idea due to opposition from brokers.

The exchange also agreed to keep an hour of lunch time after consulting the market.