Hong Kong Exchanges and Clearing planned to launch derivatives for exchange-traded funds based on A shares in the second half of the year and was studying with its Shanghai counterpart a cross-border trading mechanism, chief executive Paul Chow Man-yiu said yesterday. 'Derivatives for ETFs based on A shares, including futures and option products, are welcomed by the market,' Mr Chow said. 'We are communicating with the mainland regulatory bodies to launch those products, and we expect them to hit the market in the second half of this year.' He also revealed that a cross-border trading mechanism was in the works, without elaborating. This was the first time HKEx had announced the timetable for the derivatives since Mr Chow unveiled the exchange's plan last week. HKEx signed an agreement with the Shanghai Stock Exchange yesterday to increase co-operation in ETFs, information exchange and cross-border regulations. Zhang Yujun, chief executive of the Shanghai bourse, said the exchange had a lot to learn from its Hong Kong counterpart in derivative trading. He added that the exchange was now prepared to launch its first ETF based on the CSI 300 Index, the blue-chip gauge that tracks 300 mainland-listed firms. The Hong Kong and Shanghai exchanges are looking to consolidate their partnership, which dates back to 2002, to better tap the mainland's huge economy. Hong Kong hoped to see more dual-listed companies, and the exchange was lobbying mainland regulators to encourage more firms to offer H shares, Mr Chow said. About 60 mainland firms, including oil giant PetroChina, are traded both on the Shanghai and Hong Kong bourses. The A shares now trade at a 50 per cent premium to their H-share counterparts. Mainland investors are keen to buy H shares, in the belief that the price gap will eventually be closed.