Futures scheme secures support
The Hong Kong Futures Exchange's (HKFE) new membership scheme has received a broad welcome, already securing the membership of Hongkong Bank and Standard Chartered Bank.
The new scheme will allow up to 500 prospective market-makers to trade in non-equity-linked products as part of the futures exchange's strategy of diversifying from equity-related products.
With exchange membership costing about $4 million, most banks would consider it too expensive to join merely to trade one or two products related to their business.
To get around the problem, the exchange plans to introduce a membership scheme that will enable a qualifying market-maker to buy a 'non-voting' share for $10,000, becoming a merchant trader of the exchange.
Futures exchange chief executive Ivers Riley said yesterday the membership proposal had received support from more than half the exchange's members.
'The new non-voting members can act as market-makers of the new products to ensure market liquidity,' he said.
'It will strengthen the role of the futures market and the existing members will enjoy benefits as well.' Mr Riley said the new scheme would first attempt to attract banks to become members.
The exchange would like to launch Hibor (Hongkong interbank offered rate) futures contracts in the first quarter of the year.
Mike Powell, of HSBC Markets, said Hongkong Bank would join the new membership scheme and was committed to becoming a market-maker of Hibor futures.
'The new scheme shows that the HKFE is much more open today and it will make it easier for banks to join the market,' he said.
Standard Chartered's Hong Kong treasurer Stanley Wong said the bank would like to join the scheme.
'It just costs $10,000 to join the scheme, which is much cheaper than using up to $4 million to buy an existing share to join the exchange to trade Hibor futures, ' he said.
He said he believed other banks would be interested in the Hibor futures market because of its advantages as a hedging instrument for banks.
Chan Tze-ching, head of commercial and investment banking at Citibank, confirmed the bank would like to act as market-maker of Hibor futures.
He said he did not want to join the new membership scheme because Citibank already owned Vickers Ballas - a member of the futures exchange.
'Citibank already acts as the market-maker of rolling forex through Vickers and we would like to do the same thing for Hibor futures,' Mr Chan said.
The general manager of the Bank of China group treasury centre, Lam Yun-ming, said the group would study whether it wanted to be a market-maker for Hibor futures.
THUMBS UP Hongkong Bank and Standard Chartered to join Scheme will boost market, bring benefits Hibor futures on the cards