THE Hongkong Futures Exchange will introduce an automated price-indication system for its options market after complaints that prices being quoted on screens were out of date. The exchange is also still wrestling with the problems of producing data on options. After two days of trade, data produced by the exchange were still inconsistent or incomplete, according to Dr Virginia Mumford, manager for options and product development. Last night's quotes for the day's highest and lowest prices supplied by the exchange were collected just before the market close instead of after, and the calculations for implied volatility were incomplete. A potential investor rang Business Post after reading data supplied by the Exchange following Friday's trade to say that if deals were available at the prices printed it would be possible to become a millionaire very quickly. One problem is that registered dealers are not bothering to update price data for the less popular contracts when the Hang Seng index changes, leaving huge bargains apparently available. Dr Mumford said there had been ''murmurings'' about this, adding that it would be changed ''as soon as possible''. An automatic quotation system would be installed ''in the next few weeks'' which would allow registered dealers to supply a volatility figure to the exchange -a measure of how much risk they were prepared to take - and the exchange would automatically re-calculate options prices during the day as the Hang Seng Index moved. ''It's quite a laborious task to update them all when the index moves,'' said Dr Mumford. However, she noted that all screen prices were for indication only and that brokers must teach their clients that trades might not be available at the prices shown by data services. From tomorrow, changes are to be made in the collection of volume figures during the day's trade. Turnover figures will be taken from the clearing house instead of from the staff collecting price data, a system that was ''fraught with difficulties''. Turnover data during the day would be ''slightly delayed but more accurate'', said Dr Mumford. Volume on the exchange dropped dramatically yesterday. After Friday's confirmed trade of 878 contracts, the estimate for yesterday's trade was 295 contracts. Mr Simon Gard, options consultant for HG Asia, said: ''I think that Friday's trade was artificially high because it was the first day. We had Governor Patten's speech and there was good volume of futures. Today was artificially down, because no news cameout at all.'' The implied volatility remained constant throughout the day, at 31 per cent for put options and 25 per cent for call options, with a market average around 28 per cent. The volatility affects the price of the options, and moves as dealers reassess their view of market movements. Before Mr Patten's speech, the implied volatility was 31 per cent. There was no trade at all in June or September options yesterday. Most popular option was the April 6,200 put option, with 88 sales and a closing price of 143, unchanged on the day. Next most traded was the April 6,800 call, with 67 sales and a closing level of 133, down 30 from Friday. Activity in May contracts was confined to contracts at the current Hang Seng index or above.
