HKEx to reduce fees for trading stock options
Hong Kong Exchanges and Clearing will cut fees on stock options in a bid to boost turnover.
Twenty-six series of stock options will have their fees reduced by up to 83 per cent from May 2, as part of a range of measures unveiled yesterday to promote stock options, after the market operator recorded a drop in turnover last year.
Turnover in stock options dropped 25 per cent to 56.08 million contracts last year from 74.33 million in 2011.
Joseph Tong Tang, an executive director of Sun Hung Kai Financial, said stock option turnover fell in step with the general decline in overall market turnover of 23 per cent last year.
"As market sentiment was weak last year, investors had no interest to trade in stocks or stock options. Turnover on stock options will increase if the overall stock market turnover improves," Tong said. "The fee cut and other promotional efforts would also help to boost turnover."
Romnesh Lamba, the HKEx's co-head of global markets, said stock options now represented about half of the HKEx futures and options turnover. He believes there are opportunities for growth.
"We see a lot of potential in the further development of the stock options market, given the recent changes in the global regulatory trends that favour exchange-traded products with a clearing house as the central counterparty," Lamba said.
"With the revamp measures, we believe we can increase our stock option market's attractiveness to existing users of option-like instruments that are not traded on an exchange."
Under the new fee scales, stock options with a notional value below HK$10,000 will be charged 50 HK cents per contract, those between HK$10,000 and HK$25,000 will be HK$1, and those above HK$25,000, HK$3. That compares with the current fee of HK$3 for option value above HK$20,000 and HK$1 for those below.
From May 2, the exchange will also waive fee for real-time stock option prices for a year to enhance transparency and will add a new contract month to give investors an extra choice.
From the second quarter, option market makers will need to quote more prices for the option series.
In the fourth quarter, the exchange will reduce the minimum trading spread of stock options to cut costs further.
The exchange will also introduce a Facebook game to introduce options to retail investors.