SFC proposes to enhance position limit regime

20 Sep 2016



The Securities and Futures Commission (SFC) today launched a consultation proposing enhancements to the position limit regime to expand its scope and make it more responsive to financial market developments (Note 1).

Under the proposals, the cap on the excess position limit that may be authorized by the SFC would increase from 50% to 300% of the statutory position limit.

It is also proposed that the statutory position limit for stock options contracts will triple to 150,000. This will facilitate the implementation of the proposals in Hong Kong Exchanges and Clearing Limited's market consultation concluded in June 2016 (Note 2).

In addition, new excess position limits are proposed for index arbitrage activities, asset managers and market makers of exchange-traded funds (Note 3).

"The proposed enhancements address market participants’ business needs and encourage them to conduct more of their derivative activities on exchange markets," said Mr Ashley Alder, the SFC's Chief Executive Officer. "By improving market efficiency and enhancing liquidity, this will help to promote Hong Kong as a risk management centre."

The public is invited to submit their comments on the proposals and the corresponding rule amendments by 21 November 2016. Written comments may be submitted online via the SFC website (www.sfc.hk), by email to position-limit@sfc.hk, by post or by fax to 2521 7917.

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Notes:

  1. Under the existing position limit regime, an Exchange Participant or its affiliate may seek authorization from the SFC to hold or control Hang Seng Index (HSI) and Hang Seng China Enterprises (H-shares) Index futures and options contracts in excess of the statutory limit for the purposes of hedging risks that arise in the course of providing services to clients. The current cap on the excess that may be authorized by the SFC is 50% of the statutory limit.
  2. Hong Kong Exchanges and Clearing Limited (HKEX) proposes to revise its stock options position limit model by replacing the existing position limits of 30,000 and 50,000 contracts with a three-tier system with position limits of 50,000, 100,000 and 150,000 contracts. For details, please refer to HKEX’s consultation paper.
  3. Under the proposals, an Exchange Participant or its affiliate may seek authorization from the SFC to hold or control  HSI and H-shares Index futures and options contracts in excess of the statutory limit to conduct index arbitrage activities; asset managers that meet the specified criteria may seek the SFC’s authorization to hold or control HSI and H-shares Index futures and options contracts in excess of the statutory limit for asset management activities; and market makers of exchange-traded funds may seek authorization from The Stock Exchange of Hong Kong Limited or Hong Kong Futures Exchange Limited to hold or control futures or stock options contracts in excess of the statutory limit to hedge their risks arising from market making activities.


Page last updated : 20 Sep 2016