What are Dividend Futures?
Dividend Futures are futures contracts based on the dividends payoff of the stock index constituents over one calendar year (e.g. December contract).
Dividend futures allow equity investors to trade on the expected dividend outlook; hedge their dividend exposure or benefit from arbitrage opportunities related to dividend performance.
Advantages of Trading Dividend Futures
In addition to standardised contract design, each dividend futures contract is based on an official dividend point index calculated by an index provider.
Reduced Counterparty Risk
With HKFE Clearing Corporation Limited, an HKEx subsidiary, acting as central counterparty to every trade, counterparty risk is reduced.
Low Exchange Fee
Cost effective way for investors to trade dividends as an asset class.
Hong Kong Futures Automated Trading System (HKATS) provides complete anonymity.
Block trade facility allows investors to register large privately negotiated transactions with the Clearing House.
Continuous Liquidity by Market Makers
Market makers provide continuous two-sided market throughout the trading day to enhance trading liquidity.
Dividend Point Index as the underlying
The final settlement price of dividend futures contracts is based on the index level of the underlying HSI Dividend Point Index and HSCEI Dividend Point Index compiled and calculated by Hang Seng Indexes Company Limited (HSIL).
Dividend point index measures the total cash dividend value for all constituents of the underlying index expressed in terms of index points. Calculated on a daily basis, the dividend point index will be reset to zero once a year on the second-last trading day of December.
Besides normal cash dividends, the following types of dividends are also included in dividend point index calculation:
1. Cash dividends with scrip option; and
2. Scrip dividends with cash option.
(Please refer to HSIL’s website for details of the index methodology and latest index level)