HKEx studies measures to prevent wild fluctuations

Hong Kong Exchanges and Clearing (HKEx) is studying whether the city's stock market needs circuit breakers to prevent trading errors from causing large declines or surges in prices, a source said.

A committee formed by HKEx was in the early stages of its evaluation, the source said, adding that no decision had been made on introducing the curbs.

Exchange spokeswoman Lorraine Chan Hong declined to comment on whether a committee had been formed and said HKEx had not reached any conclusions on circuit breakers.

Exchanges have responded to the increased automation of trading by introducing curbs to prevent mistaken transactions from influencing prices. US equity markets are now protected by a system known as limit up/limit down, which prevents trades outside certain price bands. Chicago-based CME, owner of the world's biggest futures market, pauses trading during extreme volatility.

Singapore Exchange plans to add circuit breakers this year, while Hong Kong's securities regulator implemented rules for brokers and money managers from the start of this year designed to reduce risks tied to electronic trading.

"Risk controls implemented at the individual participant level cannot substitute for exchange-level risk controls such as circuit breakers," said Gabe Butler, the head of electronic trading sales for Asia at Morgan Stanley. "We have discussed these ideas with exchanges, including the Hong Kong exchange."