Members of Parliament expect the industry to generally welcome the proposal to optimize the trading unit per lot, which is expected to be implemented in the second half of next year

Hong Kong Exchanges and Clearing (HKEX) (00388.HK) is consulting market opinions on optimizing the minimum trading unit. Legislative Council member for the financial services sector, Lee Wai-hong, stated that the industry generally welcomes this move and noted that the industry has been advocating for it for many years. He believes it will be positive for both listed companies and investors, as breaking down the minimum share quantity will allow more small and medium-sized brokerages and retail investors to participate. He estimates that this consultation will receive broad support and is expected to be implemented in the second half of next year, but emphasized that the launch timing must meet actual demand and will depend on how many changes are ultimately made.

Lee Wai-hong indicated that the minimum value guideline per lot will be halved to HKD 1,000, lowering the threshold for buying and selling stocks, which could attract more young people and retail investors, further enhancing the competitiveness of brokerages and the market, and improving overall liquidity. He stated that the new arrangement will involve about 25% of listed companies, and the impact is not significant. Implementing it in two phases is also appropriate, with the first phase starting with newly listed companies, while existing companies only need to comply with the minimum value guideline per lot.

He also mentioned that this simplification to 8 types of standard lot sizes is the first step towards standardization, paving the way for further reduction in types, potentially standardizing to, for example, 100 shares per lot in the long run. He believes that standardizing contracts for stocks, derivatives, stock options, etc., can facilitate trading for investors.

HKEX proposes to consolidate the applicable securities for stocks and Real Estate Investment Trusts (REITs) from the current over 40 types into 8 standard options: 1 share, 50 shares, 100 shares, 500 shares, 1,000 shares, 2,000 shares, 5,000 shares, and 10,000 shares. At the same time, the lower limit of the minimum value guideline per lot will be reduced from the current HKD 2,000 to HKD 1,000; for issuers adopting a lot size greater than 100 shares, a new upper limit of HKD 50,000 for the minimum value guideline per lot will be added