Hong Kong’s securities watchdog the Securities and Futures Commission (SFC) has plans for the local stock market to move towards a US style “market maker” system to enhance competitiveness.

SFC chairman Andrew Sheng said the plan would help increase trading volume in smaller listed companies. “Hong Kong is an international financial centre so there must be active trading for both large and small stocks,” he said.

At present, Hong Kong’s stock market is using the order-driven trading system, in which computers automatically match the orders of the buyers and sellers. Mr Sheng said this system was suitable for stocks of large companies which would have a lot of investor interest. This system is not suitable for small companies. As result, in a normal trading day, more than 300 stocks of listed companies do not have any trading.

Mr Sheng said the US style “market maker” system would help build up liquidity in the Hong Kong market. The “market maker” system used on the New York Stock Exchange appoints brokers to act as market makers or specialists as they actively seek out share-trading opportunities by continually offering buy and sell prices on each company’s shares. Mr Sheng added that small brokers would be suitable to act as market makers as they have a good knowledge of small companies.