The Hong Kong Stock Exchange (HKEX)’s equity and financial derivatives segment delivered a three percent increase of revenue at HK$1.73 billion (US$222.3m) year-on-year (YoY) led by new listings of structured products.

The segment, which refers to derivatives products traded on the Stock Exchange and Futures Exchange, posted a stable pre-tax profit at HK$1.3 billion in 1H 21, according the interim results 2021 presented by new CEO Nicolas Aguzin (pictured).

The revenue performance was primarily attributed to a 32% increase in listing fees at HK$612m YoY as ‘the number of newly listed derivative warrants (DWs) and callable bull/bear certificates (CBBCs) reached half-yearly record highs of 8,247 and 21,017 in 1H21, respectively,’ said the bourse. 

The Hang Seng Tech Index derivative products continue to gain traction with investors - HKEX

Trading fees and tariffs of  listed structured products - the third largest revenue source at the segment - increased by 25% to HK$412m YoY ‘primarily due to lower percentage increase in trading fees from new issues of CBBCs’. 

Operating expenses rose 19% due to higher allocated costs, ‘reflecting the relative higher increase in listing fees from DWs and CBBCs and incentives relating to the MSCI index futures contracts which commenced in 2H 20,’ according to the interim report.

The structured products market ‘remained robust and resilient in 1H 21, with both listing and trading activities experiencing strong growth’, stated HKEX.

Specifically, the number of newly listed structured products climbed 18% to 29,347  comprising 8,247 DWs, 21,017 CBBCs and 83 inline warrants (IWs) in 1H 21, while the average daily turnover (ADT) was up 28% to HK$22.4 billion YoY.  

Derivatives

In the meantime, derivatives contracts average daily volume (ADV) rose three percent to 1,203,625 YoY, mainly attributable to a 37% hike in stock options, partly offset by the 23% drop in derivatives contracts traded on the Futures Exchange.

‘The Hang Seng Tech Index derivative products continue to gain traction with investors,’ said HKEX.

Since the launch of Hang Seng Tech Index Futures last November, both trading volume and open interest for them grew during 1H 21. ADV reached 8,672 contracts in Q2 21, an increase of 33% quarter-on-quarter, and daily trading volume reached a record high of 30,561 contracts on 25 May. Open interest for the futures climbed from 4,721 contracts as of 2020-end to 18,944 contracts as of 30 June.

Hang Seng Tech Index Options, which went live in January, hit a daily record high of 2,032 contracts on 11 May, and open interest reached 8,143 contracts on 30 June.

In a move to broaden Hang Seng product suite, the bourse said it is going to launch physically settled options contracts on Hang Seng Index Futures and Hang Seng China Enterprises Index Futures on 23 August.

During 1H 21, HKEX completed a minority stake investment in the newly established Guangzhou Futures Exchange (GFE) for a total consideration of CNY210 million, the first investment in a domestic futures exchange by a non-Mainland Chinese investor.

‘This investment supports our China Anchored strategy, providing HKEX with the opportunity to help build and promote the development of China’s derivatives market,’ said the bourse.

Cash segment  

‘During 1H 21, despite market volatility and challenges posed by Covid-19 on work arrangements, all of HKEX’s major trading, clearing, settlement and market data dissemination systems for the Cash, Derivatives and Commodities Markets continued to perform robustly,’ said HKEX.

In the cash division, new underlyings for leverage & inverse products emerged in 1H 21, including the TFSE China A50 Index and the first Taiwan underlying, FTSE Taiwan RIC Capped Index.

The bourse noted the significant contribution of top 10 IPOs since 2018: Baba-SW, China Tower-H, Kuaishou-W, Bud Apac, Xiaomi-W, JD-SW, Meituan-W, JD Health, JD logistics and Ntes-S. Their cash market ADT and related structured products ADT reached HK$32.9 billion in 1H 21, up 29% compared with 2020, or nearly threefold from 2019.

Exchange-wide, the top 10 IPOs contributed to 18% of cash ADT and 20% of single stock option ADV in the first six months.

The HKEX posted a record half-yearly revenue of HK$10.1 billion in the 1H21 ended in June, up 26.6% YoY, driven by high headline ATD, which led to a 25.9% rise of net profit at HK$6.6 billion YoY.

On a quarterly basis, revenue and other income was HK$5 billion in Q2 21, reflecting ‘more moderate Q2 trading’ and resulting in lower headline ADT and derivative market ADV.

Click here to read HKEX’s 1H 21 financial report.