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HKEx Survey Finds Increased Online Trading By Retail Investors

by Carla Johnson, Investors Offshore.com

26 November 2008


A survey by the Hong Kong Exchange (HKEx) has found that, driven by the increased dominance of stock options trading, the contribution of exchange participants' (EPs) principal trading to HKEx's derivatives market further increased, and retail investors' online trading grew strongly, accounting for nearly 40% of all retail investor trading.

In 2007/08, derivatives market turnover increased by 87% from 2006/07 to 105.7 million contracts. Of this, 56% was trading in stock options, up from 47% in 2006/07. By contract volume, stock options grew by 123% from 26.3 million contracts in 2006/07 to 58.8 million contracts in 2007/08.

Some key findings of the 2007/08 survey:

EP principal trading (comprising market maker trading and EP proprietary trading) contributed 61% of total market turnover (55% in 2006/07), 89% of stock options turnover (86% in 2006/07) and 26% of turnover in other derivatives (28% in 2006/07).

Local investors contributed 21% of total market turnover (24% in 2006/07), and overseas investors contributed 19% (21% in 2006/07).

Retail investors contributed 19% of total market turnover (17% from local investors, 2% from overseas investors) and institutional investors contributed 20% (around 4% from local institutional investors and 17% from overseas institutional investors).

Other findings of the survey include:

  • For Hang Seng Index (HSI) futures, overseas institutional and local retail investors were the major contributors (36% and 32% respectively of the product volume).
  • For Mini-HSI futures, the dominant contributors were local retail investors (58%).
  • For H-shares Index (HHI) futures, overseas investors were the major contributors (52%: 49% from institutions, 3% from individuals).
  • For HHI options, overseas institutional investors and EP principal trading were the major contributors (36% and 35% respectively).
  • For stock options and HSI options, EP principal trading was dominant (89% and 56% respectively).

UK investors contributed the most to overseas investor trading in 2007/08 (32%, compared to 31% in 2006/07). US investors came second (26% in both 2006/07 and 2007/08). The contributions from Australian and European (excluding the UK) investors were also significant (11% and 10% respectively in 2007/08).

Retail online trading contributed 39% of total retail investor trading (31% in 2006/07) and 7% to total market turnover (6% in 2006/07).

The Derivatives Market Transaction Survey has been conducted annually along similar lines since 1994. This year's survey covered HSI futures, HSI options, Mini-HSI futures, HHI futures, HHI options and stock options, which together accounted for about 99.6% of the total turnover of the HKEx derivatives market during the study period. The survey had an overall response rate of 95% and the respondents contributed 98% of the total turnover during the study period.


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