White Collar

HKEx needs to step up its game in futures

Small extension to evening session for futures trading still leaves exchange well behind rivals

PUBLISHED : Monday, 21 July, 2014, 10:10am
UPDATED : Monday, 21 July, 2014, 11:58pm

Bourses used to compete on product offerings and new listings; now they vie for custom by extending their trading hours.

Hong Kong Exchanges and Clearing will extend the night trading session for its futures markets by 45 minutes from November 3. Trading will last from 5pm to 11.45pm, instead of ending at 11pm as it does now.

The reason, according to the exchange, is to attract more international trading by better matching the hours that US and European markets are open.

HKEx is not alone. From Tuesday, the Tokyo Commodity Exchange (Tocom) will extend its trading hours by 15 minutes by shortening the break between its day and night sessions to 1 hour and 15 minutes. It will also open the night session earlier, at 4.30pm instead of 5pm.

The reason, according to the Tokyo bourse, is also to better match trading hours on the European markets, to cater to international investors who wish to engage in arbitrage trading.

Tocom executives, who held a roadshow in Hong Kong last week, say 40 per cent of the exchange's turnover comes from international investors, who only increased their trading on Tocom in recent years after it launched its electronic trading system, which allows direct remote access from overseas.

The night trading session now represents 37 per cent of the bourse's total turnover. Tocom will trade products from gold, oil and rubber to soya beans from 9am to 3.15pm and then from 4.30pm to 4am the next morning. This mean the exchange is open 17 hours and 45 minutes a day.

That still lags behind the Chicago Mercantile Exchange, which trades 23 hours a day.

Hong Kong, however, falls far short of overseas markets, although the night trading session from 5pm to 11pm introduced last year doubled trading hours for HKEx's futures markets to 12 hours a day.

The extension in November would narrow the gap only slightly by increasing trading hours to 12 hours and 45 minutes a day.

Not all the 18 products traded in Hong Kong's futures markets during the daytime session are available in the night session, when only five products are traded.

Now, only yuan futures, the Hang Seng Index futures and H-share index futures and mini versions of the index futures are traded at night.

While brokers complain that extended trading hours add to costs, their operations would be hurt if the local bourse loses business to its rivals.

The status quo is not an option; the exchange needs to catch up with international trends.