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Volatility Control Mechanism (VCM) and Closing Auction Session (CAS) Coming Soon to HKEx!
[May 25, 2016]

Volatility Control Mechanism (VCM) and Closing Auction Session (CAS) Coming Soon to HKEx!


HANGZHOU, China, May 25, 2016 /PRNewswire/ -- The Hong Kong Exchange (HKEx) has introduced a Volatility Control Mechanism (VCM) to safeguard its securities and derivatives markets and a Closing Auction Session (CAS) in its securities market to facilitate trade execution at securities' closing prices. These two initiatives represent major microstructure upgrades for the securities and derivatives markets in the short to medium term that are meant to enhance HKEx's overall competitiveness. These two mechanisms are expected to be formally implemented in the third or fourth quarter. Given the growth of the market system, individual brokers will be facing challenges during the upgrade

Volatility Control Mechanism (VCM)

The VCM aims to safeguard the market from extreme price fluctuations caused by trading incidents such as a "Flash Crash" and algorithm errors, and to control systemic risks arising from the interrelation between HK securities and derivatives, especially the risks of benchmarking index products.

This mechanism also helps market participants, during a short cooling-off period, by giving them a chance to re-evaluate their strategies and portfolios and make better investment decisions. Trading will not be paused by this mechanism as it is not intended to constrain the price fluctuation. An example of how this will work is as follows:





A Phase

B Phase

C Phase

The VCM will be triggered if a stock is ±10% away from the last traded price 5-min ago.

A 5-min cooling-off period will start, allow trading within the last +/- 10% of the band only.

After five minutes of cooling off,

normal trading will resume; afterwards, the market will not trigger the VCM again.


Closing Auction Session (CAS)

CAS is a common mechanism in global securities markets that allows transactions to be executed at closing prices. HKEx implemented the same mechanism (known as "U-auction phase") in 2008 to overwhelm big-money holders who were manipulating market prices. However, it didn't work smoothly and brought abnormal fluctuations to the HK market.

This year HKEx will launch a new CAS in order to meet the diverse needs of investors, and to facilitate executions at the closing price

In addition, the CAS will be released in two successive phases: Hang Seng Composite Large & Mid Cap Index constituent stocks, H shares which have corresponding A shares listed on Mainland exchanges and all ETF in the first phase; other stocks and funds in the second phase following the operation review of the first phase.

Also known as a system for trading halts and limition, VCM will be followed by the CAS and is expected to launch in the third or fourth quarter of this year.

HUNDSUN.COM Can Help Brokerages Upgrage Their Trading Systems Within This Limited Timeframe

To accomodate these new mechanisms, brokers are busy evaluating and upgrading their systems. HUNDSUN.COM is playing an important role as a trading technology provider; its system is fully prepared for the new requirements and has performed perfectly in pre-deployment tests.

Joson, General Manager at HUNDSUN.COM said: "Hundsun continuously analyzes the Hong Kong market and is always introducing products to city's financial institutions in response to any changes. With 21 years' experience in China's financial industry, HUNDSUN.COM is develping and promoting its advanced technology at full speed to keep up with the industry's rapid progress."

For example, HUNDSUN.COM recently launched a next generation agent-broker system, the HOET risk management system. HOET has a free user-defined interface and supports high-speed transactions; it is based on Hundsun's latest technology framework. which is convenient and fast. Along with its Shenzhen Hong Kong stock connect, HUNDSUN.COM will also introduce a new HOET version containing five modules .Meanwhile, HUNDSUN.COM will not only provide more flexible middle office support services for current Internet brokers to meet their business development requirements, but also provide millions of deployment solution for Internet customers and big companies.

About Hudsun

Hundsun Technologies Inc. (Hundsun), owner and developer of HUDSUN.COM, is a leading supplier of financial software and Internet services in China. It focuses on wealth and asset management, providing services and solutions to financial organizations that deal with securities, banks, funds, futures, trusts, insurance and private placement, as well as providing wealth management tools for individual investors.

Hundsun has a high quality team of 6,000 professionals, 80% of whom are R&D engineering staff. It has strong technological competencies and competitive advantages in various aspects including planning consultancy, implementation of software development, technical services, system assembly and system maintenance service. It was listed on the main board of Shanghai Stock Exchange in 2003 (SHA: 600570). For more information, please visit: http://en.hundsun.com

About HUNDSUN.COM

Founded in 2009, HUNDSUN.COM is a HKEx qualified Broker Supplied System (BSS) vendor providing IT solutions and services for financial organizations, and is the only company that provides sophisticated multi-system unified account management, multi-bank electronic transfer systems, global real-time securities & futures trading systems and settlement systems simultaneously. Nearly 30 brokage firms are using the company's securities trading and settlement systems, about 20 brokage firms are using its accounts management system, and more than 10 futures companies are using its UFOs7 global futures and options trading and settlement system.

HUNDSUN.COM also provides company-level risk management systems and Internet platform products. Our solutions include a multi-system remote opening account management system, a global securities trading system, a global futures trading system and multi-media (mobile, WeChat, PC) integrated solutions, along with hardware and software services including colocation services and IT operations, meaning that our clients do not need to build or maintain their own server rooms.


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