Trading of all investor types - local and overseas, retail and institutional - in H-shares index (HHI) products increased between July 2013 and June 2014, according to the Hong Kong Exchange and Clearing Limited’s (HKEx) Derivatives Market Transaction Survey 2013/14.
According to the report, HHI futures surpassed Hang Seng Index (HSI) futures in turnover for the first time in a survey period, and it was the most actively traded futures contract in HKEx’s derivatives market, which comprises predominantly financial futures and options, in 2013/14.
Stock options remained the dominant product by turnover in 2013/14, contributing 48% of the total (there were options for 74 securities at the end of the survey period) (See Figure 1).
The total turnover in 2013/14 for the products under study was 126m contracts, up 1% from 2012/13. Over the past decade, derivatives market trading had a compound annual growth rate of 23%.
SRP data shows that during the period covered by the survey more than 10,000 structures across jurisdictions featured the Hang Seng Index and the Hang Seng China Enterprises mainly as part of baskets of indices of which 6,369 are live products. The South Korean market with over 5,700 products is the country with the higher number of structures featuring the two Chinese indices, followed by Sweden (236 products) and Germany (83 products). In China, there were 20 structures linked to either index marketed by Hang Seng Bank (18 structures) and HSBC Bank (two structures), according to SRP data.
Investors
Exchange Participants (EPs) principal trading comprising market maker trading and proprietary trading by Exchange Participants (EPs) contributed 50% of total market turnover (compared with 49%t in 2012/13), 71% of stock options turnover (compared with 70% in 2012/13), and 31% of turnover in index futures and options (same as 2012/13).
Overseas investors contributed 27% of total market turnover and local investors contributed 23% (same as 2012/13).
In addition, retail investors contributed 19% of total market turnover (compared with 21% in 2012/13), mostly from local retail investors (16%); while Institutional investors contributed 30% in 2013/14 (same as 2012/13), most of this (24%) being from overseas institutional investors.
The report also shows that among overseas investors, continental European investors were the largest contributors to overseas investor trading (28%), followed by UK investors (25%), and US investors (21%). Almost all trading from overseas came from institutional investors (over 93%). The aggregate contribution from investors in Asia outside Hong Kong was 20% of overseas investor trading, mainly from mainland China and Singapore (9% and 7% respectively).
According to the survey, retail online trading contributed 67% of total retail investor trading (down from 70% in 2012/13) and 13% of total market turnover (down from 15% in 2012/13).
Products
For HSI futures, overseas institutional investors were the major contributors (51% of the product’s turnover), whereas for HHI futures, overseas institutional investors were the major contributors (58%). For Mini-HSI futures, the major contributor was local retail investors (41%) while for Mini-HHI futures, local retail investors were the major contributors (41%).
For HSI options, EP principal trading was dominant (56%, with 51% coming from market making) while local investors’ contribution was also significant (32%, with 26% coming from individuals). In contrast, the major contributors HHI options were EP principal trading (49%, 23% from market making and 25% from proprietary trading) and overseas institutional investors (28%).
In the mini-options segment, Mini-HSI options were mainly driven by EP principal trading (56%, 55% from market making) while local retail investors’ contribution was also significant (38%) with the the stock options segment also dominated by EP principal trading (71%, 65% from market making) while local investor trading was also significant (20%, 15% from individuals).
The survey had an overall response rate of 93% with respondents contributing 98% of the total turnover in products under study during the study period.
Click here to read the full report.
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