Futures brokers will be reaching for their coffee tonight as the local bourse introduces its first evening futures trading session.
Hong Kong Exchanges and Clearing (HKEx), which runs the local stock and futures markets, will today add a new 5pm to 11pm session for trading Hang Seng Index and H-share index futures.
Adding an evening session will double Hong Kong's futures session to 12 hours, enhancing competitiveness and matching international trends, although even after the extension, HKEx will still fall far short of the trading hours of bourses abroad; US markets trade 23 hours a day and Singapore trades 16.
About 110 of the city's 180 futures brokers have signed up to join the night session, and they say it will be hard for active traders not to join in.
"If the customers are trading in the daytime and not yet settling their positions, then their open positions will be affected by any volatility during the night trading sessions," said a venture futures trader who will join the night trading on Monday. "It is impossible to just trade the daytime session. This is because our customers need to respond to the market whatever happens at night and we have to provide the services for them."
Some brokers have complained that the new session will increase their costs.
"Each firm has to appoint at least two senior staff and have some traders on duty," said Christopher Cheung Wah-fung, a legislator representing financial services. "The firms will need to open longer at their offices, pay extra for newly hired staff and offer some money for their dinner.
"The evening trading session will definitely add to the costs of brokerage firms, while we are not sure if there will be a lot of trading," he said.
Sun Hung Kai Financial has a night trading desk for overseas futures contracts already. It is among the brokerages supporting HKEx in its introduction of night trading.
"There are some customers who are trading overseas futures through our night desk already, so it will not add much cost for us to add HKEx futures products," said Joseph Tong Tang, executive director of Sun Hung Kai Financial. "It is always good to have more products for our customers to trade."
Cheung said brokers are worried predominantly about the fact that the night trading session will only include futures, while the stock market will be closed, leaving prices open to manipulation by speculators.
An HKEx spokesman, however, said the night session includes solid risk management arrangements, including a 5 per cent price swing limit that is in line with international standards.
"The night trading session provides investors with the opportunity to manage their risk exposures in response to financial news or events during the business day in Europe or the US," the HKEx spokesman said, adding that the exchange will closely monitor the new session and will review its risk management arrangements after six months.
Despite his concerns, Cheung said Hong Kong needs to match the international trend towards longer trading hours.
He said HKEx should introduce more products to the evening session, such as commodity trading on the London Metal Exchange, the world's largest metal market and now part of HKEx.