The Hong Kong Stock Exchange (00388) is pushing to shorten the settlement cycle to T+1, with implementation as early as the fourth quarter of 2027. The consultation period will last until May 18th.

On April 17, HKEX (00388) issued a consultation paper titled "Consultation Paper on Shortening the Settlement Cycle of Hong Kong Stock Market", proposing to shorten the settlement cycle to "T+1" (i.e. completing settlement on the next business day after the trade), with the proposed implementation date in the fourth quarter of 2027, to apply to all exchange-traded transactions in the secondary market. The consultation period will end on May 18. As more and more markets consider and gradually transition to a T+1 settlement cycle, the proportion of global products traded on the shortened settlement cycle will continue to rise. Therefore, HKEX has been committed to aligning the settlement cycle with global markets. HKEX stated that transitioning to T+1 is a process involving the entire industry that requires collective effort and should be done sooner rather than later. The current "T+2" settlement cycle for Hong Kong stocks has been in place for over 30 years, but in recent years, many markets have implemented a transition to a "T+1" settlement cycle. The UK and Switzerland also plan to transition to "T+1" before 2027. If Hong Kong switches to "T+1", the settlement cycles of major global capital markets will be more unified, enhancing global capital flow efficiency and consistency. Additionally, T+1 will speed up settlement, allowing for settlement to occur on the next trading day, reducing the time for settlement, and lowering the risk of unsettled shares in the market to improve capital efficiency. HKEX believes that no measures to implement a shorter settlement cycle should be taken in the spot market before adopting T+1. According to the proposal, some activities in the spot market will transition to a T+1 settlement cycle, while primary market trading and processes like the Shanghai-Hong Kong Stock Connect will continue with the existing settlement cycle, leading to multiple settlement cycles operating simultaneously. In terms of technical readiness, HKEX Chief Executive Charles Li announced last year that HKEX's technical systems will be able to support a T+1 settlement cycle by the end of 2025. Hong Kong Financial Secretary Paul Chan Mo-po also noted that HKEX will gradually introduce new features to its trading system and upgrade systems to ensure compatibility with T+1 before the end of 2025, preparing for the shortened settlement cycle.