Algorithmic, high-frequency trading risks highlighted

Algorithmic trading and high-frequency trading may bring new risks, according to a report by Hong Kong Institute for Monetary and Financial Research.

"Potential risks associated with algorithmic trading and high-frequency trading adoption include market liquidity risk during market stress, technical risk, market integrity risk, shock transmission risk, and risk of undermined risk management," deputy chief executive of the Hong Kong Monetary Authority and deputy chairman of the HKIMR Edmond Lau wrote in the report.

However, measures have been proposed or implemented by market participants and exchanges to mitigate the risks and enhance the effectiveness of traditional risk management practices, Lau said.

The research findings also suggested that overall AT/HFT activities in Hong Kong's equity market have remained modest and stable over the period between August 2018 and July 2020.

In other news, stock market investors will have a levy for the Financial Reporting Council when trading shares from January 1 next year.

The levy accounts for 0.00015 percent of the consideration for the deal for both seller and buyer each.

To that end, Hong Kong Exchanges and Clearing (0388) will collect 1.5 Hong Kong cents for each HK$10,000 transaction for the council.