Hong Kong Exchanges and Clearing Limited (HKEx) will reintroduce trading of gold futures on the Hong Kong Futures Exchange Limited (Futures Exchange), a wholly-owned subsidiary of HKEx, on 20 October this year.
The gold futures initiative resulted from the policy direction set by the HKEx Board in January this year after the Directors discussed the final report from the consultant appointed by HKEx to study the feasibility of trading commodities derivatives in Hong Kong and considered the consultant’s recommendations. The Futures Exchange offered gold futures trading in the 1980s and 1990s, before HKEx was established. The relaunch of gold futures is in response to the renewed interest in gold.
HKEx’s gold futures market will be an open, competitive and regulated trading platform with products based on the London gold standard, which is popular among Hong Kong and international investors. Potential market participants include individual and institutional investors, bullion dealers, banks and corporations involved in gold businesses. Asian gold market participants will be able to use HKEx’s gold futures to establish or adjust positions in reaction to local and overseas developments during the Asian business day (trading hours will be 8:30 am to 5:00 pm without lunch break, Monday through Friday, excluding Hong Kong public holidays).
Gold futures will be traded in US dollars at HKEx and cash-settled in US dollars, based on the results of consultations with Exchange Participants active in the gold business and their current practices when handling gold trading. Exchange Participants will be required to have US dollar settlement arrangements with the Clearing House before they can access HKEx’s gold futures market.
Key Contract Specifications
The complete contract specifications are attached.
HKEx plans to assist Exchange Participants in introducing gold futures trading opportunities to their customers and potential customers. Details will be announced in due course.
“We aim to develop an Asian liquidity pool for trading of gold futures based on the London gold standard commonly used by international players,” said Calvin Tai, HKEx’s Head of Derivatives Market. “This initiative will expand HKEx’s range of derivatives market products and services to the commodities area.”
“HKEx always takes a long-term view when introducing new products since they often take time to develop, so we do not have any specific volume or open interest targets for gold futures,” Mr Tai added.
| Contract Specifications for Gold Futures |
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| Underlying |
Gold of not less than 995 fineness |
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Contract Size |
100 troy ounces |
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Trading Currency |
US dollars |
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| Contract Months |
Spot Month and the next two calendar months. The Chief Executive of the Futures Exchange may, in consultation with the Commission, introduce additional Contract Months for trading from time to time as he considers appropriate |
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| Price Quotation |
US dollars and cents per troy ounce |
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| Minimum Fluctuation |
US$0.10 per troy ounce |
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| Contracted Price |
The price at which a Gold Futures Contract is registered by the Clearing House |
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| Contracted Value |
Contracted Price multiplied by the Contract Size |
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| Position Limits |
Nil |
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| Large Open Positions |
500 open contracts, in any one Contract Month, per Exchange Participant for the Exchange Participant’s own behalf; and
500 open contracts, in any one Contract Month, per Client |
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| Trading Hours |
8:30 am - 5:00 pm (Hong Kong time) without lunch break
There is no trading after 12:00 pm on the eves of Christmas, New Year and Lunar New Year. The trading hours on those three days shall be 8:30 am – 12:00 pm (Hong Kong time) |
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| Trading Hours on Last Trading Day |
8:30 am - 5:00 pm (Hong Kong Time) without lunch break
There shall be no trading after 12:00 pm if the Last Trading Day falls on Christmas Eve, New Year’s Eve or Lunar New Year’s Eve |
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| Trading Method |
The Futures Exchange’s Automated Trading System (HKATS) |
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| Last Trading Day |
The third last Hong Kong Business Day of the Contract Month. If it is not a London Business Day, the Last Trading Day shall be the immediately preceding London Business Day which is also a Hong Kong Business Day |
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| Final Settlement Day |
The first Hong Kong Business Day after the Last Trading Day |
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| Settlement Method |
Cash settled contract for differences |
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| Settlement Currency |
US dollars |
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| Final Settlement Price |
The price of gold per troy ounce in US dollars at London Morning Gold Fixing carried out by The London Gold Market Fixing Limited and published by The London Bullion Market Association on the Last Trading Day, rounded up to the nearest 1 decimal place if the figure in the second decimal place is 5 or above and rounded down to the nearest 1 decimal place if it is below 5. The Chief Executive of the Futures Exchange has the power under the Regulations for trading Metal Futures Contracts to determine the Final Settlement Price under certain circumstances. |
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| Cash Settlement Value |
The Final Settlement Price multiplied by the Contract Size |
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Trading Fee
(per contract per side) |
Exchange Fee |
US$1.30 |
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The amount indicated above is subject to change from time to time. |
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Levies
(per contract per side) |
Commission Levy
Investor Compensation Levy
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US$0.10
Nil |
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Commission Levy is payable at the rate or of the amount prescribed from time to time pursuant to the Securities and Futures Ordinance. The amount indicated above is the US Dollar equivalent (at the conversion rate determined by the Futures Exchange, rounded to the nearest US Cents) of the amount currently prescribed under the Ordinance. No Investor Compensation Levy shall be payable for as long as an exemption notice published under section 25 of the Securities and Futures (Investor Compensation – Levy) Rules is in force. Exchange Participants will be notified accordingly of the exemption notice (and its termination). |
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| Commission Rate |
Negotiable |
Note: All references to the London Gold Fixing prices are used with the permission of The London Gold Market Fixing Limited, which for the avoidance of doubt has no involvement with and accepts no responsibility whatsoever for the underlying product to which the Fixing prices may be referenced.