Published On: Wed, Mar 5th, 2014

HKEx To Enhance Its RMB Currency Futures With After-hours Trading And Other Changes

Charles Li CEO HKEx

Charles Li CEO HKEx

Hong Kong Exchanges and Clearing Limited (HKEx) will add renminbi (RMB) currency futures – the world’s first deliverable RMB currency futures – to after-hours trading from 7 April this year. On the same day, HKEx will also introduce the fourth calendar quarter to the product’s contract months and add more calendar spreads.

After-hours Trading

The current trading, clearing and risk management measures for HKEx’s 5 pm to 11 pm after-hours futures trading (AHFT) will apply to after-hours trading of RMB currency futures with the exception of a price limit of plus or minus 3 per cent of the last traded price of each RMB currency futures contract month during day trading (the price limit for after-hours trading of stock index futures will continue to be plus or minus 5 per cent; the limits are based on the underlying instruments’ asset class and historical price movements). If there is no last traded price for a contract month during the day session, the previous day’s daily settlement price will be used as the reference price. For newly listed contract months, the reference price of the preceding contract month will apply.

Additional Contract Month

The addition of the fourth calendar quarter month will increase RMB currency futures’ coverage to 16 months via 8 contract months.

Contract months available for trading from 7 April 2014

Spot and Next 3 Months Calendar Quarter Months (New)
 

Apr 2014 May2014
Jun 2014          Jul 2014
 

Sep 2014 Dec 2014
Mar 2015  (Jun 2015)

 

Additional Calendar Spreads

There will be four additional calendar spreads, raising the total from 6 to 10.

Calendar spreads available for trading from 7 April 2014

(Additional spreads are in bold and underlined)
Apr 2014/May 2014 Apr 2014/Jun 2014 Apr 2014/Jul 2014
May 2014/Jun 2014 May 2014/Jul 2014 Jun 2014/Jul 2014
(Apr 2014/Sep 2014) (Apr 2014/Dec 2014) (Apr 2014/Mar 2015)
(Apr 2014/Jun 2015)

HKEx expects to have market makers for after-hours trading of RMB currency futures. Details will be announced in due course.

“Our RMB futures continue to serve investors well in providing risk management solutions and these changes will strengthen the product’s leading position as an efficient currency risk management tool that can be used by global investors,” said Romnesh Lamba, HKEx’s Co-head of Global Markets. “We had record high RMB futures turnover on February 25 as well as record high open interest on February 14 and average daily volume nearly doubled last year from the first year#.

“RMB futures are an important part of our expansion into fixed income and currencies,” Mr Lamba added. “RMB futures help position us as the leader in our industry and key provider of innovative products aligned with the internationalisation of the RMB, and the product adds further value to Hong Kong’s attractiveness as an offshore RMB centre.”

# HKEx’s RMB currency futures had a record daily trading volume of 5,970 contracts on 25 February 2014, two trading days after the previous record high of 3,565 contracts on 21 February 2014. The product’s record open interest volume of 23,887 contracts was set on 14 February 2014. RMB currency futures began trading on HKEx’s derivatives market on 17 September 2012.

Set-up for +/-5% Stock Index Futures Price Limit in AHFT Revised

Meanwhile, HKEx has revised the way it sets the plus or minus 5 per cent price limit for stock index futures in its AHFT with immediate effect.

The revision is based on a routine review of the AHFT arrangements. After the revision, the price limit set-up will better reflect the dividend discount and interest rate factors in the back month contract prices relative to the spot month price, and it will provide a more effective range of price limits for the trading of back months.

The change is outlined in the table below.

Determination of +/-5% Price Limit for Stock Index Futures in AHFT

  Previously From today
Reference Price
1. Last traded price of the spot month contract in Day Session
1. Last traded prices of individual contract months in Day Session; and
2. If last traded price is not available in any contract month in the Day Session, the spot month’s last traded price plus previous day’s rollover spread between the daily settlement price of the contract month in question relative to the daily settlement price of the spot month will be applied
Determination of Upper and Lower Price Limit for AHFT Session
  • +/-5% of Reference Price
  • +/-5% of the Reference Prices of individual contract months
Contract Months to be Applied
  • Spot month and all other contract months available for trading in AHFT Session
  • Corresponding contract months of the Reference Prices available for trading in AHFT Session

Note:
On the last trading day of the expiry month, if the last traded price in a back month is not available, the spot-next month’s last traded price plus previous day’s rollover spread (between the daily settlement price of the contract month in question relative to the daily settlement price of the spot next month) will be applied.

On the trading day immediately following the last trading day of the expiry month: (i) if the last traded price in a back month is not available, the spot month’s last traded price plus previous day’s rollover spread (between the daily settlement price of the contract month in question relative to the daily settlement price of the spot next month) will be applied; and (ii) if both the last traded price and the previous daily settlement price are not available in a back month, the spot month’s last traded price plus previous day’s rollover spread (between the reference price of the contract month in question in the Risk Parameter File relative to the daily settlement price of the spot next month) will be applied.

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