This move marks the most comprehensive change to tick sizes since HKEX’s 2021 price ladder optimization and is widely seen as part of a broader effort to align with global market standards. The implementation will bring new requirements for investor behavior, market liquidity, and brokerage systems.

What is a Minimum Tick Size, and Why Change It?

In Hong Kong markets, the minimum tick size refers to the smallest allowable price increment between bid and ask orders. For instance, if a stock trades between HK$10 and HK$20 with a tick size of HK$0.02, then only prices like HK$10.00, HK$10.02, or HK$10.04 are permitted.

Under the new rule, several price ranges will adopt smaller tick sizes—e.g., some ranges currently at HK$0.05 will drop to HK$0.01—enabling more granular and tighter price queues. This is especially beneficial for high-frequency traders and market makers.

What Does It Mean for Investors?

1. Enhanced Price Transparency and Matching Efficiency

With smaller increments, investors can express their price expectations more precisely. This may tighten bid-ask spreads and increase the likelihood of order matching—particularly advantageous for active traders or institutional investors with strict entry/exit criteria.

2. Higher Trading Costs and System Load

While retail investors may benefit from improved price discovery, the smaller tick size could also result in more frequent trades, thus increasing cumulative commission costs. Frequent order submissions and cancellations within narrow spreads could further burden trading systems, requiring brokers to upgrade infrastructure.

3. Strategic Impacts on Certain Trading Models

High-frequency trading (HFT), market-making, and ETF arbitrage strategies—many of which rely on tiny spreads and fast order placement—stand to benefit from this refinement. The change may attract additional institutional flows into tick-sensitive products.

HKEX’s Vision and Potential Long-Term Impacts

HKEX emphasized that the reform is designed to align better with international peers (e.g., U.S. and mainland China exchanges), while laying the groundwork for fully electronic markets, algorithmic execution, and high-frequency market-making.

However, some experts warn that without simultaneous changes to the order matching logic—such as “price-time priority”—smaller ticks could encourage excessive quote submission and cancellation, hurting true liquidity. As such, the effectiveness of the reform may hinge on whether accompanying measures like queue optimization or order cancellation penalties are introduced.