Hong Kong Launches Derivatives Platform

Terry Flanagan

Hong Kong Exchanges and Clearing Limited (HKEx) has announced the successful launch of Nasdaq OMX’s trading and clearing exchange technology platform, Genium INET, for HKEx’s derivatives market. The launch, which occurred in mid-October, was a full month-and-a-half ahead of the original planned roll-out schedule.

“A key factor in making our launch successful was the ability to establish a true partnership with Nasdaq OMX,” said Bill Chow, chief technology officer at HKEx. “The new project methodology with early joint testing proved to be highly effective and an important element in the delivery approach, resulting in high quality and close collaboration between the delivery teams. This ultimately contributed to shortening the time to market. We are very proud of this launch.”

The system upgrade multiplied the clearing and trading capacity, equipped the Hong Kong Futures Automatic Trading System (HKATS) with ultra-low-latency trade processing capability and improved Derivatives Clearing and Settlement System’s (DCASS) clearing processing by shortening batch running times.

Additionally, new central gateways for exchange and clearing participants were introduced to reduce the hardware footprint and network bandwidth requirements at participants’ premises. The new platform also offers new functionalities such as Tailor-Made Combination (TMC) orders, a new trading function for investors to execute option strategies with multiple legs at one net price, with auto-matching capability.

“We are very proud of this significant launch and delivery in both the major technology improvements to HKEx derivatives market systems and developing true teamwork between the two organizations leveraging our new Genium project methodology,” said Lars Ottersgård, senior vice president, market technology, at Nasdaq OMX. “HKEx is one of the largest and most advanced financial markets in the world and growing. HKEx, its participants and investors will enjoy a significant performance and capacity boost from our Genium INET technology, and it has been a true pleasure supporting HKEx’s technology initiatives.”

Separately, the Securities and Futures Commission (SFC) has granted OTC Clearing Hong Kong Ltd. (OTC Clear), a subsidiary of HKEx, recognition as a clearing house under section 37 of the Securities and Futures Ordinance. OTC Clear is established for the purpose of providing clearing services for over-the-counter (OTC) derivatives.

“The launch of OTC Clear is another major step in our strategic plan to build a strong fixed income, currencies and commodities business, and to transform ourselves into a fully horizontally and vertically integrated platform across multiple asset classes. OTC Clear will help us capitalize on the Renminbi’s (RMB) continuing internationalization, leveraging on Hong Kong’s position as the premier offshore RMB center,” said HKEx chief executive Charles Li.

Following the SFC’s recognition of OTC Clear, HKEx completed the subscription agreement under which 12 financial institutions agreed to subscribe for non-voting ordinary shares of OTC Clear as founding shareholders. The 12 founding shareholders together hold 25 per cent of OTC Clear’s total issued share capital while HKEx holds the remaining 75 per cent. HKEx continues to hold 100 per cent of OTC Clear’s voting ordinary shares.

The founding shareholders represent a cross-section of financial institutions with local, Mainland Chinese and international interests and HKEx believes that their support will provide a good foundation for OTC Clear’s future development.

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