Survey shows substantial growth in HK derivatives market

Hong Kong Exchanges and Clearing Limited (HKEX) today published the findings from its Derivatives Market Transaction Survey 2018/19, revealing Hong Kong’s derivatives market has grown significantly and continues to attract a wide range of investors.

The latest survey, which covered transactions during July 2018 to June 2019 in the major HKEX futures and options products, shows that the market turnover volume in 2018/19 Survey increased by 62% to 284 million contracts over the previous survey. The increase largely reflects the growth in trading volume of HKEX’s flagship Hang Sang Index (HSI) products and a steady increase in the trading of Hang Seng China Enterprises Index (HSCEI) products.

Overseas institutional investors had the biggest market share at 26%, followed by local retail investors (15%) and local institutional investors (14%). Among overseas investors, US investors remained the largest group, accounting for 33% of total overseas investor trading and 10% of total market volume. Asian investors contributed in aggregate 32% of overseas investor trading and 10% total market volume. European investors contributed in aggregate 23% of overseas investor trading and 7% of total market volume.

Overseas investors, and mostly overseas institutional investors, were the dominant contributors to the trading of index futures (52%) and USD/CNH futures (57%).

Regarding local investors, the survey shows that contribution from both retail and institutional local investors, increased to 29% from 21% in 2014/15. In particular, the contribution from local institutional investors increased to 14% from 6%.

Pure trading and hedging were the two main transaction purposes in the latest survey, accounting for 43% and 36% of trading turnover respectively.

There was a marked rise in the contribution of arbitrage trading to the overall derivatives market to 21% in the 2018/19 Survey from 14% in the previous survey.