US default fear prompts HKEx risk measures
Securities regulator imposes higher margins for trading index futures and orders increase in collaterals using short-term US treasury bills
Girding itself for the doomsday scenario of the United States defaulting on its debt obligations, Hong Kong Exchanges and Clearing has increased the collateral put up by investors and brokers using short-term US treasury bills.
A circular sent by the HKEx to futures traders said the "haircut" would rise to 3 per cent from 1 per cent, effective from yesterday, if the investors were using US treasuries with maturities of less than one year as collateral for margin requirements in trading index futures and options.
In addition, the exchange also increased the margin requirement of H-share and mini H-share index futures by about 15 per cent.
An increase in haircut, or the discount the HKEx applies to the valuation of collaterals to guard against volatility, means investors would need to pay more cash or put up more treasuries as collateral for their trades.
Increasing the margin and the haircut is a good risk management measure for the HKEx
"The additional risk management measures don't indicate HKEx's expectation on the likelihood of a possible US default," a HKEx spokeswoman told the South China Morning Post yesterday.