Futures and options boom at HKEx

Hong Kong Exchanges and Clearing has reported a strong increase in the volume of futures and options contracts traded on the exchange.
By None

Hong Kong Exchanges and Clearing (HKEx) has reported a strong increase in the volume of futures and options contracts traded on the exchange.

The average daily number of futures and options contracts traded increased by 34% year-on-year, to 204,137 futures contracts and 373,816 options contracts, it was revealed in Q3 results. In the nine months to 30 September, there were a total of 106,054,508 contracts traded in the derivatives market, comprising 37,459,375 futures contracts and 68,595,133 options contracts. In a bid to increase futures and options trading still further, the exchange is currently considering whether to introduce after-hours futures trading, following a consultation on the issue that ended on 8 July 2011.

The rise of options and futures trading at HKEx is notable, given recent research has indicated an increase in options trading by US investment institutions. In July, financial consultancy TABB Group released a report suggesting US-listed options volumes have grown at a compound annual growth rate of 20% since 2002.

Globally, exchanges have been attempting to diversify their revenue sources as equity volumes have seen an overall decline and competition from alternative trading venues has eaten away at profits. HKEx also added seven new exchange-traded funds (ETFs) in the first nine months of the year – a move in keeping with the growth of ETF instruments across Asia. Both Japan’s Tokyo Stock Exchange and the Stock Exchange of Thailand have also placed an emphasis on increasing the number of listed ETFs in the last 12 months.

The exchange’s Q3 results also revealed IPO funds raised during the period had increased by 21% year-on-year, reaching $194.4 billion. This included HKEx’s first RMB-denominated IPO, Hui Xian Real Estate Investment Trust, which alone raised US$1.6 billion in April. Generating renminbi issuance capabilities is a key plank of the exchange’s current three-year plan, which aims to prepare the venue for increasing competition from mainland Chinese exchanges Shanghai and Shenzhen.

As part of its G20 commitment to assist the transfer of OTC derivatives onto cleared platforms by the end of 2012, HKEx is planning to establish a new clearing house by the end of the year. The venue is also considering changes to its clearing house risk management controls, following a consultation that proposed the introduction of a standard margin system and revision of collateral assumptions, amongst other measures, that ended on 28 October 2011.

HKEx also reaffirmed its intention to upgrade its trading system. The exchange expects to spend over US$256.6 million on capital expenditure over the next three years, excluding the cost of a next generation trading platform, whose development would begin after the upgrades of the exchange’s AMS/3.8 matching engine and MDS/3.8 market data platform are completed by the end of 2011.

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