What is Volatility Control Mechanism (VSM)？

What is Volatility Control Mechanism?

The VCM is based on the regulatory guidance of the Group of Twenty (G20) and International Organization of Securities Commissions (IOSCO), and is designed to prevent extreme price volatility from trading incidents such as a “flash crash” and algorithm errors, and to address systemic risks from the inter-connectedness of securities and derivatives markets. Many international exchanges have implemented some form of volatility control mechanisms to control extreme price volatility.

HKEX’s VCM

HKEX VCM will trigger a cooling-off period for 5 minutes if the price deviates more than a predefined percentage within a specific time frame. The VCM for the securities market will be implemented on 22 August 2016. For more information, please refer to HKEX’s VCM microsite and FAQ.

Instruments covered under the VCM

In the securities market, VCM will only be applied to Hang Seng Index (HSI) and Hang Seng China Enterprises Index (HSCEI) constituent stocks (together the VCM securities). You can also refer to the finalised list of the VCM securities.