Nio's shares traded in Hong Kong closed up 5.88 percent today, giving it a 48 percent gain since May 13.
Shares of Nio (NYSE: NIO, HKG: 9866, SGX: Nio) traded in Hong Kong will be added to a local mechanism to prevent abnormal price volatility caused by mismanagement, including fat fingers, starting next week.
Nio is added to the list of Volatility Control Mechanism (VCM) securities of the Hong Kong Exchanges and Clearing Limited (HKEX), effective Monday, June 13, the Stock Exchange of Hong Kong Limited (SEHK), a wholly-owned subsidiary of the HKEX, said in a circular today.
For Nio, the triggering threshold is +/- 10 percent, according to the circular.
The SEHK did not provide more information, but this may be related to a separate arrangement that was announced late last month.
Nio will be included in the Hang Seng Composite Index as well as the Hang Seng Tech Index, and the changes will take effect on June 13, according to a quarterly review by the Hang Seng Indexes Company Limited (HSI) announced on May 20.
With the addition of Nio, the number of constituents of the Hang Seng Composite Index will increase from 516 to 517, with the number of Hang Seng Tech Index constituents remaining unchanged at 30.
The latest arrangements announced by The SEHK today mean that during normal trading hours in the Hong Kong stock market, Nio share prices will be less likely to experience momentary abnormal movements that could negatively impact these important indices.
The VCM mitigates systemic risk in the securities and derivatives markets from extreme price volatility by preventing extreme price fluctuations that can have a knock-on effect, and from trading errors that can lead to major trading events such as "flash crashes".
To date, many international exchanges have implemented different forms of market adjustment mechanisms to mitigate extreme price volatility. The HKEX implemented the mechanism on August 22, 2016.
Under this model, extreme price volatility in individual securities triggers a cooling-off period to allow market participants to reassess their strategies and positions and make investment decisions.
The mechanism does not suspend trading, is not designed to limit the daily price volatility of individual stocks, and is only applicable to block orders entered during a continuous trading session.
Once the price of a security exceeds the triggering threshold of the last traded price 5 minutes ago, the mechanism will be triggered and a 5-minute cooling-off period will begin.
During the cooling-off period, trades can still continue within the triggering threshold of the last traded price 5 minutes prior to the time of the trigger.
Nio's local peers Xpeng Motors (NYSE: XPEV, HKG: 9868) and Li Auto (NASDAQ: LI, HKG: 2015) have previously been added to the list with a triggering threshold of +/- 10 percent.
To date, there are 532 stocks on the list with triggering thresholds including +/- 10 percent, +/- 15 percent, and +/- 20 percent.
Nio's shares traded in Hong Kong closed up 5.88 percent today, giving it a 48 percent gain since May 13.