Hong Kong Exchanges and Clearing Ltd

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Fexglobal jl.gif
Hong Kong Exchanges and Clearing
HKE logo.gif
Founded 2000
Headquarters Hong Kong
Key People Charles Li, CEO; Gerald Greiner, head of global clearing
Products Cash equities, bonds and ETFs; futures and options in equity indexes and single stocks, and interest-rate futures
Website www.hkex.com.hk
Releases Company News

Hong Kong Exchanges and Clearing (HKEx) was created in 2000 as the holding company for the Stock Exchange of Hong Kong, the Hong Kong Futures Exchange (HKFE) and Hong Kong Securities Clearing, which provide an electronic platform for the trading, settlement and clearing of securities and derivatives.

HKEx, which went public and listed on its own exchange in 2000, is the third-largest stock exchange in Asia by market cap and the 10th-largest in the world. It is host to the benchmark Hang Seng Index. [1]

In 2012, the exchange reported 119.8 million derivatives contracts traded, down 14.7 percent from the previous year.

HKEx acquired the London Metal Exchange in the summer of 2012. [2] HKEx agreed in June to pay 1.39 billion pounds ($2.15 billion) for the exchange, outbidding Intercontinental Exchange.[3] The transaction was the exchange's first overseas acquisition and gave the exchange its first commodities contracts.

On April 10, 2014, China announced a plan to connect HKEx with the Shanghai Stock Exchange, offering investors in Hong Kong and the Chinese mainland unprecedented access to markets across the border. The pilot program, called Shanghai-Hong Kong Stock Connect, would allow investors in Hong Kong to trade eligible shares in Shanghai, and vice versa.[4] [5] The program is pending regulatory approval.

HKEx announced the launch of its commodities business on April 22, 2014. Pending regulatory approval and market readiness, four renminbi-denominated futures contracts (London Aluminium Mini Futures, London Zinc Mini Futures, London Copper Mini Futures and API 8 Thermal Coal Futures) will be traded on its derivatives market in Hong Kong.[6] The contracts will be cash settled, which will avoid tax barriers and make it easier to moving metals in and out of the mainland.[7]

Background

The HKEx was formed on March 6, 2000, following an initiative by the Hong Kong administration to reform the securities and futures markets to improve their global competitiveness. The member-controlled Stock Exchange of Hong Kong Limited and Hong Kong Futures Exchange Limited were demutualized and combined with Hong Kong Securities Clearing Company Limited into a single holding company, which was listed on the stock exchange on June 27, 2000.[8]

The stock exchange traces its roots to the Association of Stockbrokers in Hong Kong, established in 1891 and re-named the Hong Kong Stock Exchange (HKSE) in 1914. A second exchange, the Hong Kong Stockbrokers' Association was incorporated in 1921 and merged into the HKSE in 1947. Three more bourses followed - the Far East Exchange in 1969; the Kam Ngan Stock Exchange in 1971; and the Kowloon Stock Exchange in 1972 – which were later merged with the HKSE to form the Stock Exchange of Hong Kong Limited, which started operations on March 27, 1986.

The Hong Kong Futures Exchange was established in December 1976 as the Hong Kong Commodities Exchange, changing its name in 1985. The exchange initially traded Hang Seng Index futures using open outcry, with clearing and settlement from the wholly-owned HKFR Clearing Corporation. Options were added in 1993, with automated trading launched in November 1995. The trading floor was closed in 1999.[9]

The Hong Kong Securities Clearing Company Limited was incorporated in 1989 and started operations in 1992. The HKEx listing was underwritten by HSBC, Merrill Lynch and Morgan Stanley.

The Growth Enterprise Market launched in 1999.

In September of 2004, China Securities Depository and Clearing Corporation (SD&C) and Hong Kong Securities Clearing Company (HKSCC) announced they had signed a memorandum of understanding (MOU) on information and personnel exchange. Goals of the MOU included facilitating the exploration of substantive joint projects, improving the two parties' clearing systems, developing secure and highly efficient clearing structures and managing clearing risks.

Acquisition of London Metal Exchange

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On July 25, 2012, London Metal Exchange shareholders approved a $2.2 billion takeover offer from Hong Kong Exchanges & Clearing Ltd. The vote was more than 99 percent in favor of the deal, according to an LME spokesman. HKEx's proposal won out over offers from its rivals CME Group, Intercontinental Exchange and NYSE Euronext. Sixty-seven stockholders controlling 12.86 million shares voted on the transaction, with 64 owners holding 12.82 million shares backing the bid. In a separate tally at an extraordinary general meeting, 12.75 million shares, or 99.24 percent, were voted for the sale and 98,000 against. [10]

LME will continue to be based in London and to be regulated by the FSA. According to HKEx, the deal will help grow the number of clients in China and will help disperse LME data across Asia. In addition, HKEx said it would "keep the LME’s existing warehousing network, help the bourse develop its own clearing house and freeze trading fees until at least the start of 2015." [11]

Contract Volume

Year Total Annual Volume Percent Change World Ranking
2012 119,802,638 (-) 14.7% 23
2011 140,493,472 (+) 21.1% 24
2010 116,054,377 (+) 17.8% 20
2009 98,538,258 -- --

Key People

Products

The HKFE started with Hang Seng Index futures, adding options on the futures in 1993. The stock exchange launched equity options in September 1995.

As of Jan. 9, 2008, the futures exchange listed futures and options on the following equity indexes: FTSE/Xinhua China 25; Hang Seng China H-Financials; Hang Seng Index; H-Shares; and the Mini-Hang Seng. It also listed 43 single-stock futures and 47 stock options, as well as Hibor futures and three-year exchange fund note futures.

Hang Seng Index futures are the largest single product, with 17.2 million traded in 2007, while stock options volumes climbed to 47 million.

It was revealed in March of 2012 that the exchange planned to add commodities to its list of products. It was believed that the exchange would focus on commodity products that coud be used by domestic Chinese traders and companies that wanted to hedge risk in renminbi.[12]

HKEx announced on Feb. 14, 2013 that it received regulatory approval to offer After-Hours Futures Trading (AHFT)> It plans to introduce AHFT on Monday, April 8, 2013. The exchange is introducing AHFT in order to enable market participants to hedge or adjust their positions in response to market news and events during the European and US business days, according to HKEx.[13]

In May of 2013, HKEx announced plans to introduce new stock index futures and stock futures on three A-share Exchange Traded Funds (ETFs) as part of its continuing efforts to expand its suite of Mainland China-related products. The exchange said it would introduce CES China 120 Index futures on Monday, 8 July 2013, subject to regulatory approval.[14]

In October 2014, at "LME Week", HKEx said it planned to create a link to trade commodities with mainland China by adapting a share trading system with the Shanghai Stock Exchange that is about to go live.

Trading Hours

Trading hours are from 9:45 a.m.-12:30 p.m. and 2:30 p.m.-4:15 p.m.

On May 30, 2011, HKEx proposed after-hours futures trading (AHTF) for Hong Kong's derivatives market.[15] Specifically, HKEx proposed trading of three futures contracts: Hang Seng Index (HSI) futures, H-shares Index (HHI) futures and gold futures, from 30 minutes after the regular market close (from 4:45 pm for the index futures and 5:30 p.m. for the gold futures) until 11:15 p.m.[16]

After it received positive responses to its consultation paper on the subject, HKEx said it would proceed with a revised version of its proposal and start after-hours futures trading (AHFT) in the second half of 2012. [17]

Resources

References

  1. 2007 Market Highlights. WFE.
  2. London Metal Exchange Shareholders Vote in Favour of Acquisition by HKEx. Hong Kong Exchanges and Clearing Ltd.
  3. Hong Kong Exchanges Bid For LME Beats Out ICE. Bloomberg.
  4. Shares in HKEx Jump on Mainland Connectivity News. The Wall Street Journal.
  5. Joint Announcement of China Securities Regulatory Commission and Securities and Futures Commission. China Securities and Futures Commission.
  6. HKEx Announces Plans for its First Asia Commodities Contracts. HKEx.
  7. HKEx moves into commodities business. The Financial Times.
  8. Official history. HKEx.
  9. Speech by Geoffrey Yeh, chairman. HKFE.
  10. LME Shareholders Approve HKEx’s $2.2 Billion Takeover Bid. Bloomberg News.
  11. Hong Kong Exchanges Bid For LME Beats Out ICE. Bloomberg.
  12. HKEx to launch commodity derivatives. FT.com.
  13. HKEx To Introduce After-Hours Futures Trading on 8 April. Press Release.
  14. HKEx To Introduce More Mainland-Related Futures. HKEx.
  15. HKEx proposes after-hours futures trading. Financial Times.
  16. HKEx Publishes Consultation Paper on After-Hours Futures Trading Proposal. HKEx.
  17. HKEx News Release. HKEx.