Published On: Fri, Dec 2nd, 2011

HKEx Derivatives Market Gets Sustained Equal Support from Participants and Investors

Exchange Participants’ principal trading and investor trading maintained a roughly equal contribution to HKEx’s derivatives market turnover from July 2010 to June 2011, according to Hong Kong Exchanges and Clearing Limited’s (HKEx) Derivatives Market Transaction Survey 2010/11. The survey also found an increasing majority of retail investor trading was online.

In 2010/11, the turnover for the futures and options under study was 127 million contracts (referred to as the total market turnover in this survey), up 27 per cent from 99 million contracts in 2009/10. Stock options remained the dominant product by turnover, contributing 55 per cent of the total market turnover (as measured by contract volume).

Some key findings of the 2010/11 survey

*
EP principal trading (comprising market maker trading and EP proprietary trading) contributed 51 per cent of total market turnover (compared to 50 per cent in 2009/10), 69 per cent of stock options turnover (down from 75 per cent in 2009/10) and 29 per cent of turnover in other futures and options (up from 26 per cent in 2009/10).

*
Local investors contributed 26 per cent of total market turnover (the same level in 2009/10), and overseas investors contributed 23 per cent (compared to 24 per cent in 2009/10).

*
Retail investors contributed 23 per cent of total market turnover (compared to 24 per cent in 2009/10), mostly from local retail investors (20 per cent). Institutional investors contributed 27 per cent in 2010/11 (the same level in 2009/10), mostly from overseas institutional investors (20 per cent).

*
Major products :

o For Hang Seng Index (HSI) futures, overseas institutional and local retail investors were the major contributors (43 per cent and 25 per cent of the product’s turnover, respectively).

o For H-shares Index (HHI) futures, overseas investors were the major contributors (close to 60 per cent: 57 per cent from institutions, 2 per cent from individuals).

o For Mini-HSI futures, the major contributor was local retail investors (49 per cent) with a significant contribution from overseas investors as well (25 per cent: 18 per cent from institutions).

o For Mini-HHI futures, local retail investors were the dominant participant type (53 per cent) while EP principal trading was also significant (31 per cent).

o For HHI options, EP principal trading was the major contributor (45 per cent) while both local and overseas institutional investors’ contributions were also significant (26 per cent and 23 per cent respectively).

o For stock options and HSI options, EP principal trading was dominant (69 per cent and 52 per cent respectively), and local retail investor trading was significant (17 per cent and 23 per cent respectively).

* Among overseas investors, UK investors were the largest contributor to overseas investor trading (25 per cent in 2010/11, the same as in 2009/10). They were followed by US investors (23 per cent in 2010/11, down from 25 per cent in 2009/10). The contribution from Singaporean investors ranked third (18 per cent, up from 14 per cent in 2009/10). Mainland investors contributed 11 per cent of overseas investor trading and one-third of the trading from Asia (excluding Hong Kong). (See Figure 5).

* Retail online trading contributed 54 per cent of total retail investor trading (51 per cent in 2009/10) and 12 per cent of total market turnover (the same level in 2009/10) (see Figure 6).

The Derivatives Market Transaction Survey has been conducted annually since 1994 (by Hong Kong Futures Exchange on its market prior to 2001). The latest survey covers HSI futures, HSI options, Mini-HSI futures, HHI futures, HHI options, Mini-HHI futures (launched on 31 March 2008 and was included in the survey for the first time) and stock options. These products together accounted for 99 per cent of the total turnover of the HKEx derivatives market during the study period of the 2010/11 survey. The survey had an overall response rate of 89 per cent and the respondents contributed 98 per cent of the total turnover in products under study during the study period.

The full report on the HKEx Derivatives Market Transaction Survey 2010/11 is available on the HKEx website.

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