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About Gray Market Trading

 

1. How Do I Trade on the Gray Market?

1.1 Introduction to Gray Market Trading

Gray market trading primarily refers to participation in the early trading of new Hong Kong stocks the day before the listing of an IPO for Hong Kong stocks.

 

Not all new stocks can be traded on the gray market. Only those listed on the main board are available for gray market trading. For stocks listed on the Growth Enterprise Market, due to different offering rules, participation risks are relatively high and there is no access to gray market trading for the time being.

 

As for the relationship between the gray market price and the listing price, although price fluctuations on the gray market reflect, to a certain extent, the degree to which new stocks are sought after, the gray market price does not fully reflect the market demand; thus, market prices cannot be regarded as an indicator of how a stock is trending.

 

The gray market trading market maker accessed by Solomon JFZ is a third-party Hong Kong securities broker.

 

1.2 Gray market trading hours

Gray market trading hours are 4:15 p.m. - 6:30 p.m. on the trading day prior the official listing of the IPO;

 

If the gray market trading occurs on a half-day trading day, the trading hours are 2:15 p.m. - 4:30 p.m.

 

Trading arrangements during typhoons and black rainstorm warnings:

 

Typhoon Signal No. 8 or above/black rainstorm warning:

  1. If the signal/warning is lifted after 12:00 p.m.: Trading will be suspended throughout the day.
  2. If the signal/warning is lifted before 12:00 p.m.: Gray market trading will start at 4:15 p.m. as usual (2:15 p.m. on half-day trading days).
  3. For signals/warnings issued during a gray market trading session: Gray market trading will continue as usual until 6:30 p.m. (4:30 p.m. on half-day trading days).

 

1.3 What types of orders are supported for gray market trading?

Gray market trading supports limit orders

 

1.4 Tick size of gray market orders

Stock price (HKD)

Tick size (HKD)

0.01-0.25

0.001

>0.25-0.50

0.005

>0.50-10.00

0.01

>10.00-20.00

0.02

>20.00-100.00

0.05

>100.00-200.00

0.1

>200.00-500.00

0.2

>500.00-1,000.00

0.5

>1,000.00-2,000.00

1

>2,000.00-5,000.00

2

>5,000.00-9,995.00

5

 

2. Are Solomon's gray market prices/placements different from those seen at other securities brokers?

Gray market trading does not go through the exchange system; rather, such trades go through the internal system provided by certain securities brokers for price matching. For an independent internal transaction matching system, it is extremely common for prices to differ from other platforms.

 

Note: As certain securities brokers may access the same upstream, they will see the same quotations.

 

3. If an IPO listing is postponed or canceled, how will the trading order be processed?

  • Postponement of listing: executed trades will be considered valid. Uncompleted trade instructions will be canceled.

 

  • Cancellation of listing: All client trading instructions will be canceled or invalidated if the IPO is not successfully listed on the Hong Kong Stock Exchange

 

  • Change of listing terms/conditions: The changes to the terms and conditions of the IPO will not affect gray market trading, unless such changes result in the cancellation or postponement of the listing; in which case, please refer to the above arrangements.

 

4. Gray Market Trading and Settlement Mechanism

Trading mechanism

T+0 trading is also implemented on the gray market. Stocks bought on the gray market can be sold on the gray market on the same day.

 

Settlement mechanism

For orders executed during gray market trading, the trading date is the listing date of the IPO; thus, the settlement date is two market trading days from the date of execution (T+2).

 

e.g.: Gray market trading for IPO A is conducted on December 9, 2019 (Monday). The IPO is officially listed on the Hong Kong Stock Exchange on December 10, 2019 (Tuesday). The settlement date will be December 12, 2019 (Thursday).

 

协议及声明

About Gray Market Trading

 

Except for public holidays and the market closure due to bad weather, the Hong Kong stock market generally trades from Monday to Friday. The trading hours are as follows:
 

1. Pre-open Period

Time period

Trading Rules

Enter order 9:00-9:15

Submit, modify, and cancel auction market orders and auction limit orders

Non-cancellable 9:15-9:20

Only at-auction market orders and at-auction limit orders can be submitted, and orders cannot be withdrawn or modified

Random match period 9:20-9:22 (match will start randomly at 9:20-9:22 at the final reference equilibrium price)

Conduct matchmaking during auction period

Pause period, from random match period ends to 9:30

At-auction order: Incomplete order will be cancelled by the system; At-auction limit order: If the input price range of an incomplete order does not deviate from the nominal price by nine times or more, it will be converted to a limit order and automatically transferred to the continuous trading session

 

2. Continuous Trading Hours

Time period

Beijing Time

Morning market

9:30-12:00

Closed at noon

12:00-13:00

Afternoon market

13:00-16:00

Note: Order modification is not allowed during the closed at noon, and cancellation is allowed during 12:30 - 13:00.

 

3. Closing Auction Trading Session

Time period

Trading Rules

Closing auction period 16:00-16:01      

Calculate and publish reference price; orders cannot be submitted

Enter order 16:01-16:06

You can submit, modify, and cancel at-auction market orders and auction limit orders. The price limit of auction limit orders shall not exceed ±5% of the reference price

Non-cancellable 16:06-16:08

At-auction market orders and at-auction limit orders can be submitted, and cannot be cancelled or changed; the input price of at-auction limit orders must be between the lowest selling price and the highest bidding price

Random closing 16:08-16:10

At random closing time, at-auction market orders and at-auction limit orders can still be submitted, and cannot be cancelled or changed; the input price of auction limit orders must be between the lowest selling price and the highest bidding price