HKEX proposes halving settlement cycle to boost Hong Kong’s financial profile

Hong Kong Exchanges and Clearing (HKEX) has proposed halving the cash settlement cycle for share trading as part of efforts to enhance market efficiency and liquidity. The city’s bourse operator said in a consultation paper on Friday that it aimed to implement a “T+1” system – under which trades are settled one day after the transaction – in the fourth quarter of 2027, replacing the existing “T+2” cycle. If adopted, the shortened cycle would apply to equities, exchange-traded products, structured products, real estate investment trusts and listed debt securities, HKEX said. It would also cover the physical settlement of equities resulting from exercised stock options. “Moving to T+1 is a key step forward as we further elevate the competitiveness of Hong Kong’s markets – making transactions safer, faster, and more robust, while laying the foundation for more infrastructure enhancements and innovations,” HKEX CEO Bonnie Chan Yiting said in a statement. “We invite the industry to share their feedback and start preparing for this important transition, joining us to build a stronger, more vibrant marketplace together.” The proposal comes less than two months after Financial Secretary Paul Chan Mo-po flagged the plan in his budget speech in February. HKEX first floated the idea in July last year but did not specify a time frame for the change. The four-week consultation period ends on May 18. The reform would align Hong Kong’s US$7.5 trillion market with international peers. The US and Canada shifted to T+1 in May 2024, while the United Kingdom and Europe were exploring the same option, according to Bonnie Chan. Mainland China has long operated under a T+1 cycle. Kenny Tang Sing-hing, chairman of the Hong Kong Institute of Financial Analysts and Professional Commentators, said earlier that the change would help boost the city’s stock market turnover amid efforts to strengthen Hong Kong’s financial profile. A T+1 settlement would mark HKEX’s second major structural reform in three years, following its 2023 decision to shorten the initial public offering (IPO) settlement period from five days to two. In February, Paul Chan also said HKEX would introduce more listing reforms, including clearer guidelines for overseas companies seeking secondary listings in Hong Kong and expanding the roster of recognised overseas exchanges. HKEX has already added 20 exchanges – including New York, Nasdaq, Saudi Arabia, Singapore and Thailand – to the list, making it easier for companies from those markets to seek a secondary listing in Hong Kong. Last year Hong Kong’s main board reclaimed the crown as the world’s largest IPO market, with 114 listings raising US$37.2 billion, according to data from LSEG Data & Analytics.