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Screenshot of a breaking news alert e-mail from Q2 2017
Hong Kong Exchanges and Clearing Limited (HKEX) announced today that it will introduce its revised stock option position limit (SOPL) model on 1 June 2017 and new limits will take effect on the same day.
HKEX’s revised SOPL model is designed to align Hong Kong’s SOPL regime more closely with international practices and ensure the relevance of the individual position limits at HKEX in the long run. The revision will further improve Hong Kong’s derivatives market and enhance the competiveness of Hong Kong as an international financial centre.
The revised SOPL model received strongly supportive feedback in the market consultation conducted in April 2016 and was supported in the subsequent Securities and Futures Commission consultation on proposed enhancements to the position limit regime in Hong Kong.
Key features of HKEX’s revised SOPL model:
- Three-tier framework to address de facto single position limit issue. A contract equivalent number will be calculated for each stock option class based on the underlying stock’s market capitalisation and liquidity, and other factors. Each stock option class will be assigned to one of three tiers comprising limits of 50,000, 100,000 and 150,000 contracts based on the contract equivalent number.
- Regularly scheduled reviews. The position limits for all stock option classes will be reviewed annually and adjusted when necessary to ensure they remain in line with the market’s development.
- Adjustments for corporate actions. Following a corporate action such as share split or consolidation that affects the underlying stock, the contract size of the affected stock option may be adjusted to maintain the notional value of the contract.