HKEX starts consultation on shortening settlement cycle in cash equities market

The city’s bourse operator said the move would create a path for how and when to implement the idea as global financial markets had started adopting faster timelines, according to a document released on Wednesday. It aimed to build consensus and develop a detailed implementation timeline with views from other stakeholders, it added.

Up to 88 per cent of global cash equities by trade value were expected to settle a day after trade, commonly known as T+1, HKEX said. The US has moved to T+1, while Australia and the European Economic Area are exploring similar transitions. Hong Kong has operated under a T+2 settlement cycle since 1992.

“In a rapidly evolving global market landscape, there is urgency to seek a way forward,” CEO Bonnie Chan Yiting said. As a market operator, HKEX was fully committed to “ensuring that our financial ecosystem remains robust and fit for purpose”, she added.

HKEX was inviting feedback from all market participants until September 1, adding that any changes to the settlement cycle would be a multi-year process. The discussion would focus on secondary market transactions and exclude initial public offerings, it added.

The paper detailed the pros and cons of shortening the cycle. Potential benefits included enhanced market efficiency, reduced systemic risk and closer alignment with global markets. Navigating time-zone differences, foreign-exchange impacts and shorter post-trade timelines were among major challenges, it noted.