Remarks for H-shares Index Options Media Conference

By

Mr Patrick Conroy
Chief Operating Officer, Hong Kong Exchanges and Clearing Limited

Good afternoon ladies and gentlemen and welcome.

Joining me today to introduce H-shares Index Options are Lawrence Fok, our Deputy Chief Operating Officer, and Calvin Tai, our Senior Vice President, Derivatives Market Development and Operations.

H-shares Index Options will be available for trading in our derivatives market from Monday, 14 June. On the same day, there will also be four additional stock options and four additional stock futures in the derivatives market.

I will invite Lawrence to explain the new contracts in a few moments.

But first, let me give you a brief update on the derivatives market.

We completed the rollout of our new Derivatives Clearing and Settlement System, DCASS, on 6 April, and it has been running smoothly since then.

DCASS has enabled us to consolidate the clearing and settlement of all our futures and options on a single platform. The consolidation will help us and our Participants operate more efficiently.

The DCASS rollout completed the overhaul of our derivatives market infrastructure. The overhaul began with the consolidation of all futures and options trading on the HKATS platform in August of 2001. There were important system reviews and procedural changes in 2002. And last year, we upgraded the HKATS operating software.

In the first four months of this year, futures and options trading on our exchanges was up more than 47 per cent from the same period last year. The gains were led by stock options trading, which was up more than 59 per cent, and Hang Seng Index Futures trading, which was up more than 40 per cent.

Hang Seng Index Futures set a volume record of more than 120,000 contracts on 24 February, Stock Options set an open interest record of more than 905,000 contracts on 25 February, and Hang Seng Index Options set an open interest record of more than 169,000 contracts on 29 March.

The statistics for the first four months of the year also show that two of our five most actively traded products were introduced in the last four years*.

We believe H-shares Index Options have the potential.

There is widespread interest in H shares; our H-shares Index Futures are actively traded; and market participants have been asking about H-shares Index Options since we introduced H-shares Index Futures in December of last year.

It is important, however, to take a long-term view when introducing any new financial product.

New products often take some time to develop. As such, at this time we do not have any specific volume or open interest targets in mind for H-shares Index Options.

Lawrence, will now explain H-shares Index Options and the additional stock options and futures in detail. After his presentation, Lawrence, Calvin and I will be glad to take any questions you might have about our new derivatives contracts.

Lawrence, please.