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Investing.com -- The Hong Kong Stock Exchange is exploring a shift to a faster T+1 settlement cycle for cash equities, aligning with global market trends, according to a discussion paper released Wednesday by the exchange operator.
The Hong Kong cash market has operated under a T+2 settlement cycle since 1992, while other markets worldwide have either already implemented or are considering moving to T+1 or faster settlement cycles.
Hong Kong Exchanges and Clearing Ltd (HK:0388) stated that transitioning to a T+1 settlement cycle would enhance market efficiency, reduce systemic risk, and bring the exchange into closer alignment with global markets.
The exchange operator acknowledged potential challenges for market participants, including time zone differences, foreign exchange transactions, and shorter post-trade timelines.
"As a market operator, HKEX is fully committed to supporting the continued modernisation of Hong Kong’s financial market infrastructure, ensuring that our financial ecosystem remains robust and fit for purpose," said CEO Bonnie Chan.
HKEX plans to consult with industry participants on the proposed change, which would apply only to secondary transactions and not primary transactions such as initial public offerings.
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