HKEx cleared to start after-hours futures trading

Hong Kong Exchanges and Clearing Limited (HKEx), one of the world's biggest exchange operators by market value, announced Thursday it had been given approval from regulators in the region to start after-hours futures trading (AHFT) from April 8, 2013, a development which analysts say will give investors more flexibility in adjusting their positions.

Specifically, trading in futures of the Hang Seng Index and H-shares Index will be extended from 5pm to 11pm local time once AHFT begins, with gold futures to be considered for after-hours trading at a later date, according to a statement posted on HKEx's website.

"The extended trading hours could make a really big difference for institutional investors in the city's futures market, especially for those trading precious metals, which are highly sensitive to international news," Sun Yonggang, a gold analyst from Everbright Futures, told the Global Times Saturday.

For instance, precious metal futures contracts usually react strongly to US nonfarm payroll data, which is issued around 8:30pm local time, so if AHFT on such contracts is available, investors could cut their holdings in a more timely manner, Sun explained.

As part of the risk management arrangements and market monitoring measures introduced to facilitate AHFT, the extended trading will be subject to a 5-percent limit up or down relative to the last traded price for spot contracts during the regular session, and no margin calls will be made during the AHFT session, HKEx said in its statement.

The Hong Kong exchange company cited several motives and purposes behind the move, such as attracting more US and European investors to the local derivatives market, helping market players hedge or adjust their portfolios when important news breaks during market hours in the West and preparing for more interest in yuan-denominated products in the future from the international market.

But despite these strategic benefits, some industry insiders voiced opposition at the end of last month when HKEx submitted relevant information regarding its AHFT plans to the Legislative Council's Panel on Financial Affairs. Most of the dissent centered around concerns that a longer trading session could stir up more market volatility and increase costs for brokerages.

"If there's only a few products available for AHFT, smaller brokerages may suffer losses as they will have to offer extended services for settlement and risk management even though they will probably not see much rise in their commission fees from small and individual investors," Sun said.

Yet, Sun nevertheless conceded that AHFT is an inevitable step for HKEx as it comes into competition with Shanghai as a major international financial hub. The Shanghai Futures Exchange has been preparing for night trading of gold futures for more than a year and insiders close to matter say such trading could start later this year, Sun said.