There has been an increase in the relative contribution of principal trading by Exchange Participants (EP)- trading on the participant firm's own account, including trading as a market maker- and trading by overseas investors to Hong Kong Exchanges and Clearing Limited's (HKEx) derivatives market turnover, according to a recent survey by HKEx.

The Derivatives Market Transaction Survey 2001/02 reveals that the overall contribution of EPs' principal trading to HKEx's derivatives market turnover, measured in contract volume, increased from 33 per cent in 2000/01 to 36 per cent in 2001/02. This resulted from the significant increase in the relative contribution of EP's principal trading in Hang Seng Index (HSI) products. Meanwhile, the relative contribution of local retail investors fell to 29 per cent from 36 per cent in 2000/01. The relative contributions of local institutional investors, overseas institutional investors and overseas retail investors were 14 per cent, 18 per cent and 3 per cent respectively.

The contribution of overseas agency trading - trading on behalf of the EPs' overseas clients, including client trading channelled from the firm's parent or sister companies - increased from 17 per cent in 2000/01 to 21 per cent in 2001/02, with significant increases for the HSI products. Notably, overseas retail investors contributed 16 per cent of Mini-HSI Futures turnover. Overseas agency trading came mainly from Asia (34 per cent), the United States (30 per cent) and the United Kingdom (27 per cent).

Pure trading and hedging remained the major purposes of derivatives transactions, contributing 88 per cent of contract volume, while arbitrage contributed 12 per cent. The proportion of transactions in HSI Options for hedging increased substantially, rising from 16 per cent in 2000/01 to 46 per cent in 2001/02.

The survey collected information on online trading in derivatives transactions for the first time this year. It was found that online trading contributed 5 per cent of total retail turnover, or 2 per cent of total market turnover.

The annual Transaction Survey has been conducted since 1994, formerly by Hong Kong Futures Exchange on its market. In this year's survey, questionnaires on transactions covering the period from July 2001 and June 2002 were sent to 160 trading participants in HKEx's derivatives market. A response rate of 84 per cent was achieved.

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