The number of contracts traded on the futures exchange in the first quarter rose an annualised 48 per cent, thanks to a volatile stock market. The strong growth is in sharp contrast to full-year figures for last year, when trading dropped 20 per cent from the previous year. It also contrasts with activity on the stock exchange, where trading in the first quarter fell 51 per cent from a year earlier. The blue-chip Hang Seng Index fell nearly 15 per cent in the first three months as the market was hit by gloomy sentiment. 'The uncertainties of the stock market have increased the demand of the hedging activities,' Fred Grede, chief operating officer of Hong Kong Exchanges and Clearing, said. 'When the cash market is volatile, investors would need to use the futures products to hedge their risks,' Mr Grede said. 'People do not need to think much about hedging when the stock market is flat.' He attributed last year's drop in futures trading to mainly the shift of Hang Seng Index futures and options from floor trading to electronic trading. Traders had needed time to adjust to the electronic trading system, he said. However, electronic trading had attracted international brokerages such as Timber Hill, Hull Trading and BNP to trade in Hong Kong, which had helped increase volumes, he said. 'International players prefer to use the electronic trading system to trade local futures products,' he said. In the first quarter, 2.86 million futures and options contracts were traded. Three-month hibor (Hong Kong interbank offered rate) futures - the contracts banks use to hedge their interest-rate risks - recorded the highest growth rate of 240.8 per cent to 175,009 contracts traded. Stock options - the options contract based on individual stocks - saw 109.2 per cent growth year on year, with 1.30 million contracts traded. Mr Grede believes volumes will continue to rise with new products such as the MSCI China Free Index Futures which will be introduced on May 7.