Hong Kong Exchanges and Clearing (HKEX) has proposed halving the cash settlement cycle for share trading as part of efforts to enhance market efficiency and liquidity.

The city’s bourse operator said in a consultation paper on Friday that it aimed to implement a “T+1” system – under which trades are settled one day after the transaction – in the fourth quarter of 2027, replacing the existing “T+2” cycle.

If adopted, the shortened cycle would apply to equities, exchange-traded products, structured products, real estate investment trusts and listed debt securities, HKEX said. It would also cover the physical settlement of equities resulting from exercised stock options.

“Moving to T+1 is a key step forward as we further elevate the competitiveness of Hong Kong’s markets – making transactions safer, faster, and more robust, while laying the foundation for more infrastructure enhancements and innovations,” HKEX CEO Bonnie Chan Yiting said in a statement. “We invite the industry to share their feedback and start preparing for this important transition, joining us to build a stronger, more vibrant marketplace together.”

The proposal comes less than two months after Financial Secretary Paul Chan Mo-po flagged the plan in his budget speech in February. HKEX first floated the idea in July last year but did not specify a time frame for the change. The four-week consultation period ends on May 18.

The reform would align Hong Kong’s US$7.5 trillion market with international peers. The US and Canada shifted to T+1 in May 2024, while the United Kingdom and Europe were exploring the same option, according to Bonnie Chan. Mainland China has long operated under a T+1 cycle.