HKEX launches new products and microstructure enhancements to MSCI index derivatives suite

Source: Institutional Asset Manager 2020-08-24

Hong Kong Exchanges and Clearing Limited (HKEX) is adding new products and making microstructure enhancements to its MSCI index derivatives suite.

HKEX's wholly-owned subsidiary, Hong Kong Futures Exchange Limited (HKFE), has expanded its licensing agreement with MSCI Limited to include the broad-based MSCI Taiwan 25/50 Index, and plans to launch US-dollar (USD) denominated MSCI Taiwan 25/50 Index Futures and MSCI Taiwan 25/50 Net Total Return Index Futures (collectively, MSCI Taiwan 25/50 Index Futures) on 28 September 2020, subject to regulatory approvals.

HKEX Head of Markets, Wilfred Yiu, says: "HKEX's MSCI Taiwan equity index futures are geographically the closest offshore traded futures to the Taiwan market, offering investors the opportunity to optimise latency and enhance price discovery.

"With these latest products, we will complete the current phase of the MSCI futures suite and actively help support our customers in migrating their open interest to HKEX. This reflects HKEX and MSCI's commitment to building Hong Kong's derivatives market and to supporting the global trading community in the region."

To facilitate price discovery of the existing MSCI Taiwan (USD) Index Futures and MSCI Taiwan Net Total Return (USD) Index Futures, a pre-open trading session for these contracts will be introduced starting at 8:30am Hong Kong time and the opening of the trading session will be advanced to 8:45am starting on 28 September 2020, subject to regulatory approvals.

The 100 per cent trading fee waiver for the MSCI Taiwan (USD) Index Futures and MSCI Taiwan Net Total Return (USD) Index Futures, effective on 17 August 2020, as well as the new opening hours, will also apply to the MSCI Taiwan 25/50 Index Futures after the contracts are launched.

In addition, HKFE is working with the Securities and Futures Commission to enhance its Capital-Based Position Limit (CBPL) framework, targeting late August 2020, subject to regulatory approvals. The enhancements will ensure the risk exposures of Clearing Participants are commensurate with their financial strength whilst providing more capacity for activities such as migrating their book of MSCI index derivatives to Hong Kong.

In May 2020, HKFE signed a licensing agreement with MSCI to license a suite of MSCI indexes in Asia and Emerging Markets for the launch of 37 futures and options contracts in Hong Kong. So far, 33 of these contracts have launched on HKEX. HKEX is adding two more products to allow investors to migrate open interest to HKEX ahead of February 2021, as part of the expansion of the number of MSCI-linked derivatives listed on HKEX.

HKEX expects the MSCI Taiwan 25/50 Index Futures to be eligible for Commodity Futures Trading Commission (CFTC) certification in the US, and to be offered to US persons shortly after launch.

Subject to the CFTC certifications, US persons including Regulated Investment Companies (RIC) in the US may trade the new futures contracts on HKEX. The MSCI Taiwan 25/50 Index takes into account certain investment limits that are imposed on RICs under the current US Internal Revenue Code. The new futures products will enable investors around the world to gain exposure to roughly 85 per cent of Taiwan's listed companies by free float market capitalisation.

HKEX plans to complete the listing of all MSCI futures contracts in the current phase on 28 September 2020. It expects the three non-USD futures products, namely the MSCI Singapore Free (SGD) Index Futures, MSCI Japan (JPY) Index Futures, and MSCI Japan Net Total Return (JPY) Index Futures to launch on 28 September, subject to regulatory approvals.

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HKEX launches new products and microstructure enhancements to MSCI index derivatives suite

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