Published On: Tue, May 31st, 2011

HKEx Publishes Consultation Paper on After-Hours Futures Trading Proposal

Hong Kong Exchanges and Clearing Limited (HKEx) published a consultation paper May 30 to seek views on its proposal to introduce after-hours futures trading (AHFT) to strengthen Hong Kong’s derivatives market.

HKEx is proposing trading of three futures contracts, Hang Seng Index (HSI) futures, H-shares Index (HHI) futures and gold futures, from 30 minutes after the current market close (from 4:45 pm for the index futures and 5:30 pm for the gold futures) until 11:15 pm (the proposal’s main points are in the appendix).

HKEx research found many futures brokers in Hong Kong are open in the evening to offer trading of European and US futures during London and New York business hours. Those brokers include at least half of HKEx’s 183 Futures Exchange Participants (FEPs). Together, that group of FEPs accounts for nearly 90 per cent of HSI futures turnover and nearly 95 per cent of the HHI futures turnover.

HKEx also found AHFT is now common among other leading derivatives exchanges, with eight of the top 10 derivatives exchanges in terms of stock index futures turnover offering after-hours trading. Turnover during after-hours trading in major derivatives exchanges ranges from 15 per cent to 37 per cent of the turnover during their regular trading hours.

In addition to aligning HKEx’s futures market with other leading markets, AHFT would allow investors in HKEx’s HSI, HHI and gold futures to trade during most of Europe’s business day and part of the business day in the US. It would also provide additional business opportunities for FEPs and position Hong Kong’s derivatives market for future growth.

“After-hours futures trading would allow our investors to hedge or adjust their positions in response to market news and events here and overseas during the new trading session,” said Calvin Tai, HKEx’s Head of Trading. “It would also prepare us to take advantage of the opportunities that will result from Hong Kong’s further development as an international financial centre and offshore renminbi centre.”

“We see good reasons to do this now in our futures market but there are no plans at this time for after-hours trading in our securities market,” Mr Tai added.

The consultation paper, which covers proposed operating arrangements for after-hours futures trading at HKEx with regard to products, trading, clearing and settlement, and risk management, can be downloaded from the HKEx website. Individuals and organisations interested in submitting their views are encouraged to do so through the questionnaire. The deadline for the submission of comments is 8 July 2011.

Proposal’s Main Points
Products: Initially, Hang Seng Index futures, H-shares Index futures and gold futures would be traded in the after-hours trading session (the T+1 Session).

Trading Hours of the T+1 Session: The opening of the T+1 Session would be 30 minutes after the close of the regular trading session (the T Session), ie 4:45 pm for Hang Seng Index futures and H-shares Index futures and 5:30 pm for gold futures. The T+1 Session would end at 11:15 pm.

Clearing and Settlement: All trades in the T+1 Session would be registered as T+1 trades and would be cleared and settled on the following trading day.

Risk Management: There would be appropriate market monitoring during the T+1 Session and a new mandatory variation adjustment and margin call following the open of the T Session on the following trading day.

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