HKEx night trade plan draws critics
A proposal from the stock exchange to extend trading hours for the futures market reveals divided opinions between large and small brokers.
While small brokers are strongly opposed to the plan to introduce evening sessions of futures trading, larger players welcome the move and say Hong Kong has for too long lagged behind in taking the step.
Hong Kong Exchanges and Clearing has just completed a consultation seeking views on a new 61/2-hour session for three futures products, from 4.45pm to 11.15pm, expanding futures trading to 121/2 hours. It proposed a 30-minute break between the current market close and the new trading session.
Trades in the extended session will be settled on the following trading day. Only three futures products will be involved - the Hang Seng Index, H-share index and gold.
HKEx said it wanted to introduce the new hours in the second half of next year if the consultation showed positive feedback. The feedback, however, was mixed and added obstacles to the plan.
The market now trades for 51/2 hours in the day, but this will be extended to six hours from March to match international practice as futures markets in the US, Singapore and Japan trade for 13 to 23 hours a day.
Large international brokerage houses supported the HKEx idea.
Scott Shenk, equities director of investment bank Credit Suisse, said: 'Many Asian markets have offered night trading for some years. It would be a good move for Hong Kong to introduce a night trading session, too.'
Shenk said night trading would allow people to use futures contracts to hedge risks faced by the impact of sudden overnight news from the US or Europe. This would benefit local investors who needed to hedge their positions as they may not have direct access to overseas markets. Credit Suisse would take part when the service was launched, he said.
Joseph Tong Tang, executive director of local brokerage Sun Hung Kai Financial, also plans to join in. The brokerage already offers night trading services for clients who trade futures products in the US or Europe.
'Since we have a night trading team already, it would not add much higher costs to trade the Hong Kong products at night,' he said. 'We have seen client demand for such trading.'
At present, among the 183 futures brokers in Hong Kong, half have night trading employees to handle customers who want to trade US or London futures contracts.
But not all welcomed the move, especially those without night trading teams.
'After the minimum wage commission was introduced, the brokerage house would need to pay at least HK$28 per hour to employees on night shift,' said Chim Pui-chung, legislator for the financial services sector. 'Add additional office expenses such as ... the air conditioning and lighting, and it is going to cost you a few thousand dollars more a month. The turnover at night, however, may not be that high and it is not likely to be a profitable business for brokers if they do not already have a night team to trade futures.'
Chim also noted that gold futures contracts had only a few trades each day, and questioned the necessity for night trading for that product.
Kenny Lee Yiu-sun, chief executive of First China Securities, said local brokerages were generally opposed to night futures trading.
'[It] is only for futures products, while the stock markets are not open. This may be pure speculation instead of hedging activities,' Lee said. 'In addition, all trade is settled in the morning and it is hard for brokers to call margins in at night. There are issues in risk management and regulation that need to be addressed.'
A HKEx spokesman said it was reviewing feedback on the proposal.
The time, in minutes, HKEx will allow for lunch from March next year, down from a two-hour meal break that was cut to 11/2 hours on March 7