Overseas investors' participation in HKEx’s futures and options market in Hong Kong remained high and their contribution surpassed that of local investors for two consecutive years, according to Hong Kong Exchanges and Clearing Limited's (HKEx) Derivatives Market Transaction Survey 2012/13. The survey found that Exchange Participants’ principal trading and investor trading continued to contribute equally to the turnover in HKEx’s derivatives market, which comprises predominantly financial futures and options, from July 2012 to June 2013.
In 2012/13, the total turnover for the products under study was 125 million contracts (referred to as the total market turnover in this survey), down 7 per cent from 135 million contracts in 2011/12. Stock options remained the dominant product by turnover, contributing 48 per cent of the total market turnover (as measured by contract volume) (see Figure 1).
Key findings of the 2012/13 survey
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EP principal trading
(comprising market maker trading and EP proprietary trading) contributed 49 per cent of total market turnover (compared to 50 per cent in 2011/12), 70 per cent of stock options turnover (compared to 69 per cent in 2011/12) and 31 per cent of turnover in index futures and options (30 per cent in 2011/12) (see Figure 2).
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Overseas investors
contributed 27 per cent of total market turnover (compared to 26 per cent in 2011/12), and local investors contributed 23 per cent (compared to 24 per cent in 2011/12) (see Figure 3).
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Retail investors
contributed 21 per cent of total market turnover (the same as in 2011/12), mostly from local retail investors (18 per cent). Institutional investors contributed 30 per cent in 2012/13 (compared to 29 per cent in 2011/12), most of this (24 per cent) being from overseas institutional investors. (see Figures 2 and 3).
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Major products (see Figure 4):
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For Hang Seng Index (HSI) futures, overseas institutional investors were the major contributors (49 per cent of the product’s turnover) while local retail investor trading and EP proprietary trading were also significant (21 per cent and 20 per cent respectively).
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For H-shares Index (HHI) futures, overseas institutional investors were the major contributors (58 per cent). EP proprietary trading was also significant (26 per cent).
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For Mini-HSI futures, the major contributor was local retail investors (44 per cent) with a significant contribution from EP proprietary trading (25 per cent).
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For Mini-HHI futures, local retail investors were the major contributors (49 per cent). EP proprietary trading was also significant (37 per cent).
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For HSI options, EP principal trading was dominant (50 per cent, 42 per cent from market making) while local investors’ contribution was also significant (30 per cent, 23 per cent from individuals).
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For HHI options, the major contributors were EP principal trading (51 per cent, 29 per cent from market making and 22 per cent from proprietary trading) and overseas institutional investors (28 per cent).
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For Mini-HSI options, EP principal trading was dominant (55 per cent, 54 per cent from market making) while local retail investors' contribution was also significant (34 per cent).
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For stock options, EP principal trading was dominant (70 per cent, 66 per cent from market making) while local investor trading was also significant (20 per cent, 17 per cent from individuals).
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Among overseas investors, UK investors and Continental European investors were the two largest contributors to overseas investor trading (28 per cent and 27 per cent respectively)
. They were followed by US investors (18 per cent). Almost all trading from these origins came from institutional investors (over 95 per cent). The aggregate contribution from investors in Asia outside Hong Kong was 23 per cent of overseas investor trading, mainly from Mainland and Singapore (10 per cent and 8 per cent respectively) (See Figure 5).
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Retail online trading contributed 70 per cent of total retail investor trading (up from 63 per cent in 2011/12) and 15 per cent of total market turnover (compared to 13 per cent in 2011/12) (see Figure 6).
The survey has been conducted annually since 1994. The latest survey covers HSI futures, HSI options, Mini-HSI futures, Mini-HSI options (covered for the first time in the survey), HHI futures, HHI options, Mini-HHI futures and stock options. These products together accounted for 99 per cent of the total turnover of the HKEx derivatives market during the study period of the 2012/13 survey. The survey had an overall response rate of 93 per cent and the respondents contributed 98 per cent of the total turnover in products under study during the study period.
The full report on the HKEx Derivatives Market Transaction Survey 2012/13 is available on the HKEx website.
Notes:
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"Total market turnover" in the report refers to the total turnover, measured in contracts traded, of the products under study.
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Due to their dominance by contract volume, stock options have a large influence on the trading pattern of the HKEx derivatives market even though they have much smaller notional value than the other futures and options.
- HKEx surveyed Exchange Participants only. Their responses stemmed from their own understanding of their clients. HKEx had no direct access to these clients, nor could it verify their nature.
- The survey is subject to a number of limitations. For example, an Exchange Participant might not know the true origins of all its client orders. The Exchange Participant might classify transactions for a local institution as such when in fact the orders originated overseas and were placed through that local institution, or vice versa. As a result, the findings may deviate somewhat from the true picture.
Figure 1. Contract volume and percentage of total by product under study
(2008/09 – 2012/13)
Note: Numbers may not add up to 100 per cent due to rounding.
Figure 2. Distribution of derivatives market trading volume by investor type
(Jul 2012 – Jun 2013)
(a) Overall
(b) Stock options
(c) Index futures & options
| Notes: |
(1) |
Exchange Participants' principal trading comprises market maker trading and EP proprietary trading. |
|
(2) |
Numbers may not add up to 100 per cent due to rounding. |
Figure 3. Distribution of derivatives market trading volume by investor type
(2003/04 – 2012/13)
(a) Local vs overseas
(b) Retail vs institutional
Note: Numbers may not add up to 100 per cent due to rounding.
Figure 4. Distribution of derivatives market trading volume by investor type
for overall market and each product (Jul 2012 – Jun 2013)
| Notes: |
(1) |
Market maker trading and EP proprietary trading are components of EP principal trading. |
|
(2) |
Numbers may not add up to 100 per cent due to rounding. |
Figure 5. Distribution of overseas investor trading volume in derivatives by origin
(Jul 2012 – Jun 2013)
| # |
Reported origins in "Rest of Asia" in 2012/13 are India, Indonesia, Macau, Malaysia, Philippines, South Korea and Thailand. |
| * |
Reported origins in "Others" in 2012/13 are Africa, Bermuda, British Virgin Islands, Canada, Cayman Islands, Cook Islands, Cyprus, Liberia, Mauritius, Middle East, New Zealand and Samoa. |
| Note: |
Numbers may not add up to 100 per cent due to rounding. |
Figure 6. Retail online trading to total derivatives market volume
and retail turnover volume (2003/04 – 2012/13)
Ends