Hong Kong Exchange launches after-hours futures trading

Hong Kong Exchanges and Clearing Ltd (HKEx) introduced after-hours futures trading (AHFT) Monday, a decision which will allow local investors to adjust their positions in response to market news breaking during post-Asian trading.

Specifically, Hang Seng Index and H-share Index futures will be open for trading between 5 pm and 11 pm local time, the HKEx announced in AHFT guidelines issued on March 15. Regularly-scheduled trading hours in the region normally end at 4:15 pm.

Gold derivatives will be considered for inclusion in the scheme at a later date, according to statements from the exchange.

The market's response to AHFT is expected to be positive, since over 60 percent of local traders said they would participate in the scheme, Tai Chi-kin, the head of HKEx's trading division, explained to Hong Kong media Sunday.

As more local futures contracts open to the global capital market, many Asian futures exchanges, including those in Singapore and Japan, have adopted AHFT to help investors react in a timely manner to events in Europe and the US which could influence the direction of derivatives, Li Xunlei, chief economist and deputy CEO of Haitong Securities Co, told the Global Times. "The HKEx's launch of after-hours trading is just the latest example in a global trend," said Li.

Meanwhile, since Hong Kong is the world's largest offshore yuan hub, any move toward greater integration with overseas markets will be welcomed by investors in the US and Europe looking to tap into yuan-denominated futures, Zhao Yan, a senior analyst from Everbright Futures, told the Global Times.

Yet, Zhao also shared some concerns about the Hong Kong exchange's debut of AHFT, since such a move will invariably inflate the bourse's operating costs while also further shrinking its already slim profit margin.

HKEx extended its futures trading period by one hour in March 2011 and March 2012 respectively - bumping up daily trading time from 4 hours to 6 over the period - prior to the roll out of AHFT.

"HKEx's operational expenses have been increasing since 2011 ," Zhao said.

The cost of running the exchange totaled 2.12 billion yuan ($341.74 million) in 2012, up 13 percent year-on-year and reaching an all-time high, according to the annual report the HKEx released in February.

Amid concerns about risk, contracts will only be allowed to fluctuate by 5 percent above or below spot month pricing, HKEx explained in its statement.