Dark Market Trading Rules

This article introduces key information about dark market trading, including an overview of the dark market, trading hours, order types, minimum change in price, price variations among brokers, handling of orders in case of delayed or canceled listings, and the trading and settlement mechanisms. It aims to help you understand how dark market trading works.

1. How to trade in the dark market

The dark market allows you to buy and sell shares of new Hong Kong stocks one day before their official listing.

Not all new stocks can be traded in the dark market. Generally, only stocks to be listed on the main board are eligible for dark market trading. Stocks that will be listed on the Growth Enterprise Market (GEM) are excluded due to different listing requirements and higher associated risks.

As for the relationship between the dark market price and the listing price, while the rise or fall in the dark market can, to some extent, reflect the new stock's popularity, the dark market price does not fully represent overall market demand and should not be considered an indicator of the stock's trend.

The dark market trading market maker connected to Longbridge is a third-party Hong Kong broker.

2. Dark market trading hours

Normal trading day: Dark market trading hours are from 16:15 to 18:30 on the trading day before the new stock is officially listed.
Half-day trading: If the dark market day is a half-day, the trading hours are from 14:15 to 16:30.
During typhoons and black rainstorm warnings:
- Signal/Warning is lifted after 12:00: Trading is canceled for the entire day.
- Signal/Warning is lifted before 12:00: Dark market trading will start as usual at 16:15 (or 14:15 on half-days).
- Signal/Warning is issued during the dark market trading session: Trading will continue as usual until 18:30 (or 16:30 on half-days).

3. Types of dark market orders

Dark market trading supports limit orders.

4. Minimum price change for dark market orders

Stock price (HKD)	Minimum price change (HKD)
0.01-0.25	0.001
>0.25-0.50	0.005
>0.50-10.00	0.01
>10.00-20.00	0.02
>20.00-100.00	0.05
>100.00-200.00	0.1
>200.00-500.00	0.2
>500.00-1,000.00	0.5
>1,000.00-2,000.00	1
>2,000.00-5,000.00	2
>5,000.00-9,995.00	5

5. Price/Order book differences between Longbridge dark market trading and other brokers

Dark market trades are not conducted through the exchange's system. Instead, they rely on the internal systems provided by certain brokers for quotation and trade matching. As these are independent internal trade matching systems, price differences between various platforms are common.

Note: Some brokers might connect to the same upstream system, so their quotations may be consistent.

6. Handling of orders if a new stock's listing is delayed or canceled

Delayed listing: Executed orders will be considered valid. Unfinished delivery instructions will be canceled.
Canceled listing: All clients' trading instructions will be canceled and become invalid, as the stock will not be listed on the Hong Kong Stock Exchange.
Changes to listing terms/conditions: Changes to the new stock's terms and conditions generally do not affect dark market trading, unless such changes lead to the listing being canceled or delayed. In these cases, the above rules apply.

7. Dark market trading and settlement mechanism

Trading mechanism: Dark market trading also operates on a T+0 basis. Stocks purchased in dark market trading can be sold on the same day within the dark market trading session.
Settlement mechanism: For orders filled in dark market trading, the trade date is considered the new stock's official listing date. Therefore, the settlement date is the second trading day after the trade date (T+2).

Example: The dark market trading for New Stock A took place on Monday, 9 December 2019. The stock was officially listed on the Hong Kong Stock Exchange on Tuesday, 10 December 2019. The settlement date would be Thursday, 12 December 2019.

Disclosures

This article is for reference only and does not constitute any investment advice.