Institutional investors involved in the fledgling index options market have also complained they are being over-charged because there are only four major market makers.

Mr Leong told The Securities Journal he was also encouraged by progress made by the Hang Seng Index Options, launched on March 5. In particular, he was happy with daily turnover.

''We feel that this product is supported by market demand and the prospect is promising,'' he told the journal.

Mr Leong's enthusiasm was shared by Monetary Affairs Secretary Michael Cartland, who said the options market was a landmark in Hongkong's financial development.

Mr Leong said that among the major factors considered before launching index options were whether the product would be suitable for the market and if Hongkong investors would understand its operations.

He said an options market was essential if Hongkong were to maintain its status as an international financial centre, especially for risk and capital management.

Among the most pressing tasks, the report said, was to educate investors on the differences between the screen-based trading system and the present open-outcry system.

Mr Leong said many investors failed to realise prices that appeared on computer screens were only indicative, and did not necessarily represent real market prices.

Mr Leong said that while preparing for the launch of index options, the HKFE had carried out a number of improvements.

These had included the use of a sophisticated clearing system from the options market in Chicago, and better education and training programmes.

Mr Leong said the HKFE would continue to focus its efforts and resources on the development of options this year. He hinted that the exchange would consider new products, including a financial derivative.

HKFE will also be busy providing technology and services to the recently launched Nanjing Petroleum Exchange after signing a co-operative agreement last month.

Mr Leong said the petroleum exchange would send its daily trading information by computer, and HKFE would register each broker's trades and tabulate the margin requirements before sending the information back to the petroleum exchange.

Mr Leong said he was looking forward to the planned launch of equity options by the Stock Exchange of Hongkong next year, which would allow prices of equity options to be determined by competitive open bids.

The Securities Journal reported that the exchange had released a second consultative paper on exchange-traded equity options.

The paper sought market views on the proposed market structure, trading and clearing procedures as well as funding and participation requirements for the new product.

The paper said the proposed equity options market would need the establishment of an option exchange as a clearing house.

Stock exchange chief executive Paul Chow said the management of options trading would be in the hands of a new division of the exchange or a new subsidiary limited company.

The exchange set up a five-member task force, headed by Mr Stephen Rive, to supervise development of the equity options market.

Mr Rive joined the exchange in 1991 after being director of strategic research and planning at the Toronto Stock Exchange.