HKEx makes meal of longer trading hours

For restaurant owners in Central, and stockbrokers who have become accustomed to Hong Kong's famous champagne lunches during the two-hour trading break, Hong Kong Exchanges and Clearing must seem like the party-pooper intent on whipping traders into line with a non-stop dedicated trading frenzy. HKEx first proposed extending trading hours in 2001, re-examined the issue with more moderate proposals in 2002, scrapped those proposals in 2003, but is having another crack at reducing traders' waistlines by releasing another consultation in October. Given the opposition earlier on in the decade, HKEx will have its work cut out to rob brokers of what they seem to think is their right to a two-hour lunch break, especially if it does not come up with more convincing arguments.

Despite being an international financial centre, Hong Kong has one of the shortest trading periods, with four hours either side of a two-hour lunch break starting at 12.30pm. The proposed changes would open the trading period half an hour earlier at 9.30am, shorten the lunch break to one hour, but still close trading at 4pm.

The current proposals are, in fact, more about aligning trading periods with markets on the mainland, and are a far cry from the drastic increase to a trading period of 11 hours suggested in 2001. Brokers were right to dispute the correlation between length of trading hours and trading volume, and question the necessity of extending trading hours for the sake of it.

If HKEx continues to sell this reform based on increasing trading volume, it will be welcomed as much as the prospect of a sandwich for lunch. Instead, it needs to lay out the advantages in aligning Hong Kong's trading periods with markets on the mainland and the prospect of reducing trading risks by eradicating the pent-up demand brought about by the lag between opening hours, thereby creating a more transparent market. Perhaps then we will hear arguments from opponents of reform more convincing than an airing of the concerns of high-end restaurants. Michelin-starred chefs in our hotels will no doubt be able to respond to the market.