Hong Kong Exchanges and Clearing Limited (HKEx) has recently conducted the Derivatives Retail Investor Survey 2001/02 (DRIS) to study the investment behaviour, attitudes and opinions of retail derivatives investors in Hong Kong. This is the first survey of its kind in Hong Kong, and so provides new information for regulators, policy-makers and practitioners. The survey found most of the respondents were motivated by their stock investment experience to start derivatives trading, profit seeking was a major reason for derivatives trading, and an increase in market liquidity and transparency would be a major motivating factor for investors to trade derivatives more.

Fifty-four per cent of the survey respondents were motivated by their stock investment experience to start trading futures or options on HKEx. Nineteen per cent were influenced by other people to enter the market.

The three main reasons for trading derivatives were found to be "trading for profit" (chosen by 71 per cent of the survey respondents), "high rate of return" (40 per cent) and "hedging" (32 per cent).

The key stimuli for trading more in derivatives on HKEx were found to be "a more liquid market" and "a more transparent market" (chosen by over 50 per cent of survey respondents). "Lower margin requirements" and "easier to get market data and information" came next (chosen by 47-48 per cent of respondents).

Most of the respondents agreed that clearing, settlement and trading of derivatives on HKEx were efficient and the HKEx derivatives market was an orderly market.

Eighteen per cent of the respondents had online trading experience in HKEx futures or options. Lower commissions were most frequently chosen (53 per cent of respondents) as the motivating factor for more online trading.

Among the survey respondents, the median experience in trading HKEx futures or options was four years and the median trading frequency was one to two times a week. The median deal size was $60,000 in terms of initial margin.

The survey was primarily conducted by mailing a questionnaire via three Futures Exchange Participants who supported the survey to over 1,800 of their retail clients for their voluntary completion and reply. An overall response rate of 15 per cent was obtained. The methodology does not constitute a random sample. Therefore, the survey findings may not be representative of the whole derivatives retail investor population in Hong Kong. Nevertheless, since no other survey is available the findings provide reference in an otherwise empty picture.

A full report of the Derivatives Retail Investor Survey 2001/02 is available on the HKEx website (http://www.hkex.com.hk/eng/stat/research/dmts/dmtspi.htm).