Futures exchange to raise minimum margins

THE Hong Kong Futures Exchange has announced that from Monday there will be yet another increase in minimum margin and maintenance margin requirements to reflect the market's volatility.

The minimum margin for clients to trade in Hang Seng Index futures will be increased to $70,000, equivalent to 1,400 index points, from $50,000.

The maintenance margin will jump to $56,000 from $42,500.

The margin requirement for exchange members will be revised to $55,000, or 1,100 index points.

Chief executive Ivers Riley said the revisions were undertaken to take into account volatile market conditions, which commonly saw intra-day fluctuations of 500 points.

''This revision will definitely facilitate the clearing house to perform its risk-management function and our members in maintaining their clients' margin requirement,'' he said.


In December, the futures exchange raised its minimum margin requirements and maintenance levels to $50,000 and $42,500, respectively.

The margin level for exchange members was increased from $30,000 to $40,000.

Mr Riley said since the last adjustment in December, the market's volatility had edged up slightly.

The futures exchange had opted on the side of conservatism by making further revisions.


He said the new requirements could see large institutional investors buy fewer contracts.

But he doubted whether the requirements would affect small retailer investors.


Industry sources said Baring Securities recently bought a seat on the exchange for $2.05 million, just $50,000 higher than the previous sale two weeks earlier.

The rising prices for seats on the exchange reflects the market's growing appeal and stability as memories of its collapse in 1987 become less painful.

Last year, the exchange posted an operating profit of about $29 million compared with $6.4 million in 1992.


The number of contracts jumped 122.3 per cent to 2.41 million and the retained surplus increased to $50 million.

Mr Riley said the exchange planned to focus on the installation of an electronic trading system to support future growth.

The exchange plans to launch new currency products this year but has not released specific details.


A new trading system and more products are seen as strong weapons in Hong Kong's goal to become the region's leading centre for futures and options trading.