Introduction
HKEX’s derivatives market has both Market Maker (MM) Program and / or Liquidity Provider (LP) Program for different derivatives products. The MM obligations and MM incentives under the MM Program for futures contracts and index options contracts are set out in the HKFE Rules. The MM obligations and MM incentives under the MM Program for stock options contracts are set out in the Options Trading Rules of the Stock Exchange. LP Program is a commercial arrangement for the Exchange to appoint LPs to provide liquidity for new products, which require more flexibility in terms of LP obligations and LP incentives and are not stipulated in the exchange rules and procedures.
The derivatives products with MM Program and / or LP Program are as follows:
|
Product Type
|
Contract
|
MM Program
|
LP Program
|
|
Futures Contracts
|
Stock Index Futures
|
HSI Volatility Index Futures
HSI Dividend Point Index Futures
HSCEI Dividend Point Index Futures
BRICS Futures
Sector Index Futures
|
CES China 120 Index Futures
Sector Index Futures
|
|
Stock Futures
|
Single Stock Futures
|
N/A
|
|
Currency Futures
|
USD/CNH Futures
|
EUR/CNH Futures
JPY/CNH Futures
AUD/CNH Futures
CNH/USD Futures
|
|
Interest Rate Futures
|
1-month HIBOR Futures
3-month HIBOR Futures
|
N/A
|
|
Commodity Futures
|
N/A
|
LME Mini Copper Futures
LME Mini Aluminum Futures
LME Mini Zinc Futures
LME Mini Nickel Futures
LME Mini Tin Futures
LME Mini Lead Futures
|
|
Option Contracts
|
Stock Index Options
|
Hang Seng Index Options
Mini Hang Seng Index Options
Hang Seng China Enterprises Index Options
Mini-Hang Seng China Enterprises Index Options
|
N/A
|
|
|
Stock Options
|
Single Stock Options
|
N/A
|
|
Currency Options
|
N/A
|
USD/CNH Options
|
|
Product Type
|
MM
|
LP
|
|
HKFE Futures Contracts and
Option Contracts
|
-
HKFE Exchange Participant (EP), or
-
Corporate entity as client of EP must have an association with the EP and also must meet at least one of the requirements:
i) be a regulated entity by the Securities and Futures Commission (SFC) to deal in securities or futures contracts, except as an introducing agent ; or licensed for similar activity by an overseas authority having a Memoradum of Understanding with SFC;
Ii) be a licensed bank;
Iii) have a credit rating of A- or above (S&P) or A3 or above (Moody’s); or
iv) have a minimum paid-up capital of HK$50 mil. and minimum shareholder funds of HK$100 mil.
|
HKFE Exchange Participant or the client of the Exchange Participant
|
|
SEHK Stock Options
|
Option Trading Exchange Participant
|
N/A
|
For more details of the application procedures, please refer to the HKEX website at http://www.hkex.com.hk/eng/market/hkex_part/criteria/otherapp/Table_Form_5.htm
LP and market making obligations and incentives
The following tables summarise the market making obligations and incentives in futures and options contracts:
Stock Index Options
There are three types of market makers in HKEX’s stock index options market:
- Primary Market Maker (PMM);
- Market maker providing continuous quotes (CQMM); and
- Market maker responding to quote request (QRMM).
Below is a summary of the CQMM and QRMM program ( T Session):
Market Making
Obligation
|
Provision of
Continuous Quotes (CQ)
|
Response to
Quote Requests (QR)
|
| Assigned Series
|
Not less than 50 option series*
(except that, not less than 25 option series for Mini-Hang Seng Index Options and Mini-Hang Seng China Enterprises Index Options**)
|
All QR issued (except for QR in long dated index options)
|
| Trading Requirement
|
Provision of CQ not less than 70%
of the trading hours in each calendar month
|
Response to not less than 70%
of the QR in each calendar month
|
Maximum Time Limit for
Responding to QR
|
N/A
|
Response to a QR within 20
seconds of the QR
|
| Minimum Display Time
|
Not less than 20 seconds, unless a change in the price level of the Spot Month Futures Contracts of the underlying index occurs during the 20 seconds display period, in which case, market makers may change their quotes
|
Maximum bid/offer spread
(Except for Long Dated Index Options)
|
For HSI Options and Hang Seng China Enterprises Index Options:
For Mini-HSI Options and Mini-Hang Seng China Enterprises Index Options:
|
Month |
Price |
Max. bid/offer spread |
|
1st, 2nd calendar |
1-750 points |
Max (30 points, 10% of bid) |
|
> 750 points |
75 points |
|
1st quarter |
1-750 points |
Max (40 points, 20% of bid) |
|
> 750 points |
150 points |
|
2nd quarter |
1-750 points |
Max (40 points, 20% of bid) |
|
> 750 points |
150 points |
|
Minimum Quote Size
|
For HSI Options and Hang Seng China Enterprises Options
|
Month |
Min. Quote Size |
|
1st, 2nd, 3rd, 4th calendar |
5 contracts |
|
1st , 2nd, 3rd quarter |
3 contracts |
For Mini-HSI Options and Mini-Hang Seng China Enterprises Index Options
|
** For Mini-HSI Options and Mini-Hang Seng China Enterprises Index Options, CQMM should provide bid / offer quotes in at least 25 option series chosen from the following selection pool:
|
Contract Month |
Option Series |
Series For Selection |
|
Call |
Put |
|
Spot month |
Out-of-the-Money |
15 |
15 |
|
In-the-Money |
2 |
2 |
|
2nd Calendar Month |
Out-of-the-Money |
15 |
15 |
|
In-the-Money |
2 |
2 |
|
1st Quarter Month |
Out-of-the-Money |
10 |
10 |
|
In-the-Money |
2 |
2 |
|
2nd Quarter Month |
Out-of-the-Money |
10 |
10 |
|
In-the-Money |
2 |
2 |
|
Total |
116 |
Below is a summary of the CQMM and QRMM program (T +1 Session):
|
Market Making
Obligation
|
Provision of
Continuous Quotes (CQ)
|
Response to
Quote Requests (QR)
|
|
Assigned Series
|
Not less than40 option series* (except that, not less than20 option series for Mini-Hang Seng Index Options **)
|
All QR issued (except for QR in long dated index options)
|
|
Trading Requirement
|
Provision of CQ not less than 35%
of the trading hours in each calendar month
|
Response to not less than 35%
of the QR in each calendar month
|
|
Maximum Time Limit for
Responding to QR
|
N/A
|
Response to a QR within 20
seconds of the QR
|
|
Minimum Display Time
|
Not less than 20 seconds, unless a change in the price level of the Spot Month Futures Contracts of the underlying index occurs during the 20 seconds display period, in which case, market makers may change their quotes
|
|
Maximum bid/offer spread
(Except for Long Dated Index Options)
|
ForHSI Options and HSCEIOptions:
|
Month
|
Price
|
Max. bid/offer spread
|
|
1st, 2nd, 3rd, 4thcalendar
|
1-750 points
|
Max (40 points, 20% of bid)
|
|
> 750 points
|
150 points
|
|
1st ,2ndquarter
|
1-750 points
|
Max (60 points, 30% of bid)
|
|
> 750 points
|
225 points
|
|
3rdquarter
|
1-750 points
|
Max (80 points, 40% of bid)
|
|
> 750 points
|
300 points
|
For Mini-HSI Options:
|
Month
|
Price
|
Max. bid/offer spread
|
|
1st, 2ndcalendar
|
1-750 points
|
Max (40 points, 20% of bid)
|
|
> 750 points
|
150 points
|
|
1stquarter
|
1-750 points
|
Max (60 points, 30% of bid)
|
|
> 750 points
|
225 points
|
|
2ndquarter
|
1-750 points
|
Max (60 points, 30% of bid)
|
|
> 750 points
|
225 points
|
|
|
Minimum Quote Size
|
For HSI Options and HSCEI Options
|
Month
|
Min. Quote Size
|
|
1st, 2nd, 3rd, 4thcalendar
|
3 contracts
|
|
1st ,2nd, 3rdquarter
|
2 contracts
|
For Mini-HSI Options
|
Month
|
Min. Quote Size
|
|
1st, 2ndcalendar
|
3 contracts
|
|
1st ,2ndquarter
|
2 contracts
|
|
* For HSI Options and HSCEI Options, CQMM in the T Session should provide bid/offer quotes in at least 40 option series chosen from the following selection pool:
|
Contract Month
|
Option Series
|
Series For Selection
|
|
|
Call
|
Put
|
|
Spot month
|
Out-of-the-Money
|
15
|
15
|
|
In-the-Money
|
2
|
2
|
|
2ndCalendar Month
|
Out-of-the-Money
|
15
|
15
|
|
In-the-Money
|
2
|
2
|
|
3rdCalendar Month
|
Out-of-the-Money
|
15
|
15
|
|
In-the-Money
|
2
|
2
|
|
4thCalendar Month
|
Out-of-the-Money
|
10
|
10
|
|
In-the-Money
|
2
|
2
|
|
1st Quarter Month
|
Out-of-the-Money
|
10
|
10
|
|
In-the-Money
|
2
|
2
|
|
2nd Quarter Month
|
Out-of-the-Money
|
10
|
10
|
|
In-the-Money
|
2
|
2
|
|
3rdQuarter Month
|
Out-of-the-Money
|
10
|
10
|
|
In-the-Money
|
2
|
2
|
|
Total
|
198
|
** For Mini-HSI Options, CQMM in the T Session should provide bid / offer quotes in at least 20 option series chosen from the following selection pool:
|
Contract Month
|
Option Series
|
Series For Selection
|
|
|
Call
|
Put
|
|
Spot month
|
Out-of-the-Money
|
15
|
15
|
|
In-the-Money
|
2
|
2
|
|
2ndCalendar Month
|
Out-of-the-Money
|
15
|
15
|
|
In-the-Money
|
2
|
2
|
|
1st Quarter Month
|
Out-of-the-Money
|
10
|
10
|
|
In-the-Money
|
2
|
2
|
|
2nd Quarter Month
|
Out-of-the-Money
|
10
|
10
|
|
In-the-Money
|
2
|
2
|
|
Total
|
116
|
Market Maker (MM) Incentives for Stock Index Futures and Options
|
Product
|
Market Maker
Fee (HK$)
|
Market Maker in Other Stock Index
Products with same underlying Index
Fee (HK$)*
|
Standard
Exchange
Fee (HK$)
|
| Hang Seng Index Futures (HSIF)
|
n.a.
|
3.50 (MM in HSIO, MHIF or MHIO)
|
10.00
|
| Hang Seng Index Options (HSIO)
|
2.00
|
3.50 (MM in MHIF or MHIO)
|
10.00
|
| Mini Hang Seng Index Futures (MHIF)
|
n.a.
|
1.00 (MM in HSIO or MHIO)
|
3.50
|
| Mini Hang Seng Index Options (MHIO)
|
0.40
|
0.70 (MM in HSIO or MHIF)
|
2.00
|
| Hang Seng China Enterprises Index Futures (HHIF)
|
n.a.
|
1.00 (MM in HHIO or MCHO)
|
3.50
|
| Hang Seng China Enterprises Index Options (HHIO)
|
0.50
|
1.00 (MM in HHIFor MCHO)
|
3.50
|
| Mini-Hang Seng China Enterprises Index Futures (MCHF) |
n.a. |
0.70 (MM in HHIF or HHIO or MCHO) |
2.00 |
| Mini-Hang SEng China Enterprises Index Options (MCHO) |
0.20 |
0.35 (MM in HHIF or HHIO) |
1.00 |
| HSI Dividend Futures |
0.60 |
n.a. |
3.00 |
| HSCEI Dividend Futures |
0.30 |
n.a. |
1.50 |
| HSI Volatility Index Futures |
2.00 |
n.a. |
10.00 |
| Sector Index Futures |
0.40 |
n.a. |
2.00 |
* The number of contracts that are eligible for a reduced Exchange Fee may be limited as specified in the Trading Procedures relating to Stock Index Futures and Stock Index Options contained in the HKFE Rules
The incentives of MM in the T+1 Session include
|
Product
|
Market Maker
Fee (HK$)
|
Market Maker in Other Stock Index
Products with same underlying Index
Fee (HK$)*
|
Standard
Exchange
Fee (HK$)
|
|
Hang Seng Index Futures (HSIF)
|
n.a.
|
3.50(MM in HSIO, MHIForMHIO)
|
10.00
|
|
Hang Seng Index Options (HSIO)
|
2.00**
|
3.50 (MM in MHIF or MHIO)
|
10.00
|
|
Mini Hang Seng Index Futures (MHIF)
|
n.a.
|
1.00 (MM in HSIO orMHIO)
|
3.50
|
|
Mini Hang Seng Index Options (MHIO)
|
0.40**
|
0.70 (MM in HSIO or MHIF)
|
2.00
|
|
Hang Seng China EnterprisesIndex Futures (HHIF)
|
n.a.
|
1.00 (MM in HHIO or MCHO)
|
3.50
|
|
Hang Seng China EnterprisesIndex Options (HHIO)
|
0.50**
|
1.00 (MM in HHIFor MCHO)
|
3.50
|
|
Mini-Hang Seng China Enterprises Index Futures (MCHF)
|
n.a.
|
0.70 (MM in HHIF or HHIO or MCHO)
|
2.00
|
* The number of contracts that are eligible for a reduced Exchange Fee may be limited as specified in the Trading Procedures relating to Stock Index Futures and Stock Index Options contained in the HKFE Rules
** if Market Maker performance is better than the MM Obligation in the T+1 Session, trading fees for thr products which the MM make market in the T+1 Session may be waives.
