HKEx Posts Positive Metrics in January Despite Shortfall in FX Volumes

Trading volumes at one of Asia’s largest and most established trading venues, the Hong Kong Exchange and Clearing (HKEx), was upbeat in its core securities and derivatives segments. The firm reported volumes for the first month of 2015 with the average daily volume rising 43% on a YoY basis. Figures were similar in its derivatives segment with average daily trading volumes jumping 38% when compared to 2014 figures. The move highlights Hong Kong’s role as a hub linking China to the rest of the world.

HKEx reported a 43% increase in its equities trading volumes, with its average daily trading volumes reaching $12.5 billion, an increase of 43% when compared with $8.7 billion in 2014. At the same time, volumes increased in its derivatives segment with the average daily turnover of futures and options in January 2015 reaching 770,683 contracts, an increase of 38% when compared with the 557,033 contracts for the same period last year.

HKEx was the first major exchange to launch Chinese yuan currency futures and has seen trading volumes grow exponentially as participants look beyond major currency pairs and move to emerging markets. The Chinese yuan joined the top-ten tradable currencies according to the 2013 BIS Survey.

January FX volumes were lower month-on-month at HKEx, the venue seeing a reduction of 28% in the average number of contracts traded in January. During the month there were 916 contracts executed, dropping from 1,286 in December 2014. However, annual volumes were in the green with the venue reporting a 18.3% rise YoY, with 774 contracts traded in January 2014.

HKEx has been developing itself as a key trading venue for multi-asset traders. It has been positioning itself as the 'go to' market for investors that are looking to enter the China market and the recent Shanghai-connect link, allowing participants to access mainland China instruments through the exchange which has been beneficial for the firm.

Competing on a Global Scale

Since the firm’s acquisition of the London Metal Exchange, HKEx has been strengthening its infrastructure to cater to the growing number of participants interested in dealing with the venue. Last month, the exchange issued a consultation paper on new safety measures that support the venue during times of enhanced Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad Read this Term.

The firm published a consultation paper on the proposed introduction of a Volatility Control Mechanism in its securities and derivatives markets and a Closing Auction Session in its securities market. The proposed enhancements of Hong Kong markets' micro-structure are aimed at improving the global competitiveness of Hong Kong's markets.

Developing Chinese Financial Markets

Apart from connectivity with the Shanghai-connect and proposals for enhancements with a Shenzhen-connect, HKEx has been enhancing trade and settlement procedures for investors that trade in mainland Chinese markets. HKEx plans to deploy a new system which would reduce risks associated with holding Chinese equities, by allowing custodians, who typically hold stocks on an investor’s behalf, to open a segregated account in the investor’s name with the Clearing House Clearing House A clearing house is defined as an intermediary between two parties, a buyer and seller, which helps facilitate the overall process from trade inception to settlement. Clearing houses streamline the exchange of payments, securities, or derivatives transactions.The clearing house is situated between two clearing firms who also helps reduce the risk of either member firm failing to honor their respective trade settlement obligations.Buyers and sellers enter into legally binding agreements for the e A clearing house is defined as an intermediary between two parties, a buyer and seller, which helps facilitate the overall process from trade inception to settlement. Clearing houses streamline the exchange of payments, securities, or derivatives transactions.The clearing house is situated between two clearing firms who also helps reduce the risk of either member firm failing to honor their respective trade settlement obligations.Buyers and sellers enter into legally binding agreements for the e Read this Term.

In addition, the new system will allow the Hong Kong and Shanghai exchanges to see investors’ holdings in Shanghai shares without those shares having to be physically moved.