Hong Kong Exchanges and Clearing Limited (HKEx) plans to introduce trading of HSI Dividend Point Index Futures (HSI Dividend Futures) and HSCEI Dividend Point Index Futures (HSCEI Dividend Futures) on Monday, 1 November, subject to regulatory approval.

The HSI Dividend Point Index and HSCEI Dividend Point Index, which are calculated by Hang Seng Indexes Company Limited, measure the total cash dividend value for all constituent stocks of the underlying index – the Hang Seng Index (HSI) and the Hang Seng China Enterprises Index (HSCEI, or H-shares index) respectively – expressed in terms of index points.

HKEx is introducing its dividend futures to meet the market demand for exchange-traded derivatives that can be used to hedge and manage dividend exposure while providing the benefits of transparent pricing, standardised product specifications, centralised clearing and low trading fees.

“Our market participants are interested in using dividend futures to hedge the dividend risk of Hong Kong-listed stocks as an alternative to over-the-counter dividend swaps,” said HKEx’s Head of Trading Calvin Tai.  “These new contracts will address market needs and complement our existing range of HSI and HSCEI products.”

HKEx has invited applications for market makers for the HSI and HSCEI dividend futures.  HKEx plans to work with Futures Exchange Participants on promotion and educational programmes to increase market awareness of its dividend futures.

Attached below are highlights of the contract specifications that have been submitted for regulatory approval and the levels of the Hang Seng Dividend Point Index Series as of today.

Dividend Futures Contract Specifications (pending regulatory approval)

Contract Multiplier: $50 per index point

Minimum Fluctuation: 0.01 index point

Contract Months: Three nearest December contract months (for example, Dec 2010, Dec 2011 and Dec 2012)

Last Trading Day: Two Business Days immediately preceding the last Business Day of the Contract Month

Final Settlement Price: The quotation of the HSI Dividend Point Index and HSCEI Dividend Point Index in 2 decimal places respectively compiled, computed and disseminated by Hang Seng Indexes Company Limited taken on the Business Day following the Last Trading Day.