Paul Chow says investor positions should be allowed to exceed 10,000 as the market has now stabilised Regulators may relax the position limit of 10,000 futures or options contracts per investor, seen by many traders as an outmoded legacy of the Asian financial crisis seven years ago. Hong Kong Exchanges and Clearing chief executive Paul Chow Man-yiu said yesterday that the time was right to amend the cap, and that discussions with the Securities and Futures Commission on the issue were nearly complete. 'Financial markets are much more stable than during the Asian financial crisis,' Mr Chow said after hosting the launch of FTSE/Xinhua China 25 Index futures and options. He said the Hong Kong market's capitalisation was large enough to support more futures trading while investors had more need to hedge with futures contracts. 'It is the right time to increase the position limit, making it easier to invest in the local derivatives market.' Last year, Hong Kong's stock market ranked ninth worldwide in terms of market capitalisation, but the local futures market ranked 35th by trading volume. Mr Chow said he began lobbying the SFC to relax the cap at the end of last year. After five months' efforts, negotiations were in the final stage, he said. He did not say what he thought the new cap would be. The current rule bans investors from holding more than 10,000 derivatives positions. The measure was introduced in 1998, when speculators were thought to have used derivatives instruments to attack the Hong Kong dollar and manipulate stock prices. Traders said the restriction undermined Hong Kong's status as a derivatives trading centre, prompting trading to migrate overseas and into the unregulated over-the-counter market. 'The rollout of FXI China 25 futures and options further strengthens our position as the leading international marketplace for China-related equities and derivatives,' Mr Chow said. Mr Chow hopes a relaxation of the position limit would help boost local futures trading. To encourage development of the market, the HKEx plans to introduce new futures products every six months. The next new futures products to be launched this year will be callable bull and bear contracts, subject to SFC approval. 'Callable bull and bear contracts have been successful in many overseas markets and we believe they would be popular in Hong Kong as well,' Mr Chow said, noting that futures trading had been growing an average of 30 per cent annually for the past two years and grew a comparative 10 per cent in the first quarter this year. 'This shows investor interest in futures and options contracts is on the rise in Hong Kong. What we need to do is to make it easier for them to trade and give them a wider range of product choices,' Mr Chow said. Trading turnover of the FTSE/Xinhua China 25 Index futures reached 369 contracts yesterday, with 175 options contracts also changing hands. 'The first day of trading was not too bad. It will take some time for investors to learn about the new products,' Timber Hill Securities Hong Kong managing director David Friedland said.