(Yicai) July 31 -- The Hong Kong Stock Exchange’s plan to reduce the minimum spread, or the smallest price change for traded securities, could further enhance market liquidity, industry insiders told Yicai.

The new rules, which will cut minimum price increments by as much as 60 percent, could lower the cost of high-frequency trading and encourage greater participation by quantitative funds, the insiders said.

Starting on Aug. 4, the HKEX will implement the first phase of adjustments, targeting stocks and related products priced between HKD10 and HKD50 (USD1.30 and USD6.40). The second phase, scheduled for next year, will encompass securities priced between HKD0.50 and HKD10 (6 US cents to USD1.30), halving their minimum price change.

Under the new framework, the minimum price change for securities priced between HKD10 and HKD20 will drop to HKD0.01 from HKD0.02 (to 0.1 US cent from 0.2 US cent). For securities priced between HKD20 and HKD50, the increment will fall to HKD0.02 from HKD0.05. The changes will apply to stocks, real estate investment trusts, and equity warrants.

The initiative follows the creation of a dedicated task force in 2023 to enhance market liquidity and improve trading efficiency by narrowing price spreads. The HKEX published a consultation paper proposing the revisions in June last year and released a summary of the feedback in December.

Trading activity on the HKEX has surged this year, with average daily turnover doubling to HKD240.2 billion (USD30.6 billion) in the first half from a year earlier, according to its own data.

Editor: Emmi Laine