Here is what you need to know about the change.
How does the new arrangement differ from current practice?
At present, the stock and futures markets delay opening if the Hong Kong Observatory issues the No 8 or higher typhoon signal, or the black rainstorm signal, before the market opens at 9:30am. If the market has opened, trading is suspended 15 minutes after one of these warnings is issued. Trading resumes two hours after the signal is lowered to No 3, but if the No 8 warning lasts until noon, or starts after noon, the market shuts down for the rest of the day.
Since 2018, storms have caused market closures 11 times, including four last year.
Under the new arrangement, investors can trade Hong Kong stocks and derivatives amid severe weather, as well as buy mainland A shares and other products through the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect schemes.
Who will benefit?
Investors will be able to continue trading stocks and derivatives, stockbrokers will earn commissions, the government will collect stamp duties and the exchange and the SFC will collect trading fees.
Based on May’s average daily turnover of HK$140 billion (US$18 billion), avoiding a day of closure means the government can collect HK$280 million in stamp duties, which equal 1 per cent of the transaction for both the buyer and seller. Brokers will earn a collective HK$420 million in commissions based on the online trading rate of 0.15 per cent.
HKEX will earn HK$15.82 million from its trading fee of 0.00565 per cent, while the SFC will take in HK$7.56 million from its 0.0027 per cent transaction levy on both buyer and seller.
According to overseas experience, the turnover of the stock market will be similar to a normal trading day.
Can investors trade at brokers’ branches during storms?
No. Physical branches of banks and brokers will close as normal during black-rainstorm and typhoon No 8 signals. HKEX deputy CEO Wilfred Yiu Ka-yan said investors will be able to use online trading and digital banking services for trading and settlement.
HKEX will require all brokers to make sure their systems are ready to support their traders and staff members working from home during severe weather. Testing will be performed in August to make sure remote trading operates smoothly.
“Most brokerage firms have already allowed their staff to work from home during Covid-19, while most investors can use digital systems to trade stocks and make payments.,” Yiu said. “We believe the market is ready to remain open during severe weather.”
If some brokers need to require certain staff to work in the office, they should arrange transport, insurance and food and drink for them, HKEX said.
The exchange will give some small brokers that need more time to upgrade their systems a three-month grace period. Until the end of this year, HKEX will settle any outstanding payment obligations for these brokers during the market trading day during storms. Their trading will be restricted until they make full repayment.
What do investors need to know?
Investors should talk to their banks or brokers about trading and settlement services during severe weather, and be prepared to use online trading platforms and digital banking.
Will bank branches be open during typhoons?
Hong Kong’s 1,000 or so bank branches will be closed during typhoon No 8 or above or during the black rain signal, but all physical cheques deposited to bank branches the day before the storms will still be processed.
Carmen Chu, executive director of the HKMA, said fund transfer will also be done through electronic methods.
“HKMA has reminded banks to allocate sufficient resources to maintain e-banking and fund transfer services,” she said. “Banks are in the final stage of preparations to support the stock market opening during severe weather.”