With interconnected global markets having more significance on price discovery of tradable instruments, Hong Kong’s Stock and Derivatives exchange has announced that it received regulatory approval for rule changes that will enable it to offer After-Hours Futures Trading (AHFT) and it plans to introduce AHFT on Monday, 8 April 2013.
From 8 April, Hang Seng Index and H-shares Index futures will be available for trading from 5 pm to 11 pm (after-hours trading) in addition to the regular trading sessions: 9:15 am to 12 noon and 1 pm to 4:15 pm. Gold futures will be considered for inclusion in AHFT at a later stage.
The Hang Seng Index is offered as a rolling CFD contract by brokers, the new extended hours will have a positive impact on liquidity in the contract. Other major indices trade beyond the normal exchange hours as the price of the instrument is correlated to other indices.
HKEx will arrange briefing sessions for its Participants in early March to explain the trading, clearing and risk management arrangements for AHFT. Participants interested in joining AHFT must complete all related system tests required by HKEx.
HKEx decided to offer AHFT for the following strategic and business reasons:
- AHFT will enable market participants to hedge or adjust their positions in response to market news and events during the European and US business days;
- With Hong Kong becoming an offshore renminbi (RMB) centre, AHFT will enable HKEx to cater for international interest in RMB products in the future;
- AHFT is a prerequisite for HKEx to move into asset classes traded on a global basis, including foreign exchange; and
- Over time, AHFT can help attract more European and US investors to HKEx’s derivatives market.
HKEx will monitor the development of AHFT and review the trading and clearing operations and risk management arrangements for AHFT six months after the implementation.
Key Arrangements for AHFT
Trade Registration and Clearing and Settlement
Trades will be registered as AHFT trades and cleared and settled on the following trading day.
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Price Limit Up/Down Mechanism
Sell orders with a price below 95 per cent of the last traded price for the spot month contract in the regular trading session (9:15 am to 12 noon and 1 pm to 4:15 pm) and buy orders with a price above 105 per cent will not be allowed.
Appropriate market monitoring will be put in place during the AHFT session. There will be no intra-day variation adjustments or margin calls during the AHFT session. A mandatory variation adjustment and a margin call will be made following the opening of the regular trading session on the next trading day based on that day’s Calculated Opening Prices, with mark-to-market losses and margin to be collected by 12:00 noon.
If it is a Hong Kong public holiday, there is half-day trading in the HKEx securities market or it is a bank holiday in both the UK and US, there will be no AHFT.
Typhoon and Black Rainstorm Warnings
If a Typhoon Signal 8 or above or a Black Rainstorm Warning is in effect after 12 noon, there will be no AHFT.
The Block Trade Facility will not be available in AHFT.