HKEX proposes slashing board lot variations to boost liquidity, enhance market efficiency

The Hong Kong stock exchange has proposed standardising board lot sizes, reducing the number of trading units from more than 40 to eight options in a bid to boost market efficiency and liquidity.

Bourse operator Hong Kong Exchanges and Clearing (HKEX) was proposing to limit the choices listed companies make regarding their trading unit size, or board lot, from one share to a maximum of 10,000 shares, according to a consultation paper published on Thursday. The options in between are: 50, 100, 500, 1,000, 2,000 and 5,000.

Currently, 44 board lot units are used on the HKEX, leading to operational inefficiency, decreased hedging and arbitrage precision, as well as being a departure from the global standard of using one share or 100 shares, the exchange said.

Additionally, the trading value per lot will be capped at HK$50,000 (US$6,425) for issuers that adopt board lot units larger than 100 shares, while the board lot value floor guidance will be halved to HK$1,000 from the current level to reflect the reduced trading costs.

The moves are expected to remove the entry barrier for retail investors and prepare for the city’s stock exchange to ultimately implement a single board lot unit structure.

“These proposals aim to make trading simpler and more accessible to all, while also catering to the needs and distinctive features of Hong Kong’s financial markets,” said Gregory Yu, HKEX’s head of markets.