HKFE access Sept 5, 2019

def

def

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As an FYI, the HKFE had serious connectivity problems all morning and finally decided to suspend all derivative trading at 2 PM for the day. The after hours session will be suspended as well.
 
HKFE strange way of managing this problem.

Problem started about 1/2 hour after the exchange opened.
Problem continued till HK lunch time (exchange is closed during lunch time).
Exchange opened again at 1pm ie after lunch with similar problem.

They should have suspended the trading during lunch time or earlier , not later at 2 pm.
problem lingering for ~ 4.5 hours.
I am sure they will come up with better plan.
 
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maxinger said:
HKFE strange management.

Problem started about 1/2 hour after the exchange opened.
Problem continued till HK lunch time.
Exchange opened again at 1pm ie after lunch with similar problem.

They should have halted the exchange during lunch time, not later at 2 pm.
More...

IMO they should have halted on the open. Apparently there were a number of firms that could not log onto the gateway prior to the open and throughout the AM it got progressively worse as connections dropped and couldn't reconnect (to main or backup). That's a tough call but should have been a no brainer over the equity break.
 
The SGX XINA50 (China-A50 index, 50 stocks listed on Shanghai & Shenzhen) remained up. SGX is all of $2 per month, may be a good backup for those trading the MHI. Singapore is a top notch exchange.

upload_2019-9-5_10-50-26.png
 
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SGX A50 is indeed a liquid and other contract to consider adding to your arsenal.

FYI the HKFE will resume trading this AM. The issue seems to come from an order type used to generate implied combos (bait orders) used by some market makers as they can’t be used today. So business as usual we hope.
 
def said:
SGX A50 is indeed a liquid and other contract to consider adding to your arsenal.

FYI the HKFE will resume trading this AM. The issue seems to come from an order type used to generate implied combos (bait orders) used by some market makers as they can’t be used today. So business as usual we hope.
More...

could you please elaborate further about this bait orders?
 
maxinger said:
could you please elaborate further about this bait orders?
More...

Think of them as derived orders. The exchange (OM system) will take current market prices to create "synthetic" spread orders which will update based on the quotes of each leg. There is an order type for market makers to trade or create such spread orders. So "bait orders" are really just an order type called MO37 that the OM system for HKEX supports. It is a two sided double quote to effectively create spread orders.

Let's look at basic future spreads.
- Assume a future market of 100 at 110 in the front month and no market in the second month.

- You place a bid of 5 for the roll ie. pay 5 more points for the outer month than the front month.

- The system will then create a bit order in the second month which will update with each tick in the front month of 105 bid.

So if someone else comes in and sells the second month future at 105, you will get the fill at 105 and you sell sell the front month future at 100 to the other party on the bid. The 105 bid in the second month is "the bait" order.

For quote requests for a spread, you'll need to put in two quotes at the same time. That is done via order type MO37 and that is the order type that apparently caused the problems at the exchange.

Hopefully this is somewhat clear but if not, check HKEX or other exchanges that use the OM system and search for "bait" and MO37 and you'll probably get better explanations and examples.
 
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