HKEX today published a discussion paper on reducing the settlement cycle for Hong Kong's secondary stock market. This proposal aims to facilitate market dialogue and forge industry consensus on implementation timing and methodology. The consultation specifically addresses settlement for secondary market equity trades, excluding primary market transactions such as IPO subscriptions.

Since 1992, Hong Kong's cash equity market has maintained a T+2 settlement cycle. Over the past two decades, major global exchanges have progressively adopted shorter cycles. Numerous markets have recently implemented or are considering T+1 or faster settlements. According to World Federation of Exchanges data, HKEX projects that 88% of global equity trading volume will settle under T+1 or T+0 frameworks by 2027.

Transitioning to T+1 settlement offers significant advantages including enhanced market efficiency, reduced systemic risk, and closer alignment with international counterparts. This shift poses challenges, particularly for market participants navigating time-zone differences, currency conversions, and compressed settlement windows. Operational adaptations will require system upgrades, process automation, and cross-market coordination to maintain stability.

Markets currently operating T+1 cycles include mainland China, the United States, Canada, Mexico, Argentina, and India. The European Economic Area, UK, and Switzerland are expected to implement T+1 by 2027.

Bonnie Chan, HKEX Chief Executive Officer, emphasized the exchange's commitment to strengthening Hong Kong's financial infrastructure: "As market operator, HKEX fully supports optimizing our market architecture to ensure a resilient, future-ready ecosystem. We're pleased to initiate this consultation on accelerating settlement cycles and welcome broad industry participation." Chan added that HKEX aims to establish a detailed implementation timeline after thorough consideration of market feedback, inviting all participants to contribute perspectives.