Hong Kong halts derivatives trading after technical problems

Trading in September Hang Seng Index futures totalled 60,070 contracts before the suspension, down 80 per cent from the previous day.
Trading in September Hang Seng Index futures totalled 60,070 contracts before the suspension, down 80 per cent from the previous day.PHOTO: EPA-EFE

HONG KONG (BLOOMBERG) - Hong Kong's exchange operator halted derivatives trading on Thursday (Sept 5) because of unspecified connectivity problems, deepening losses in the local stock market at a time of heightened sensitivity about the city's status as Asia's premier financial hub.

The move to suspend trading in the afternoon and after-hours sessions came after Hong Kong Exchanges & Clearing Ltd experienced technical issues with its derivatives platform on Thursday morning. The exchange's websites also faced intermittent access problems. HKEX said its clearing system for derivatives will remain open for the afternoon session and that all other markets remain fully operational.

The issues hampered trading in the morning just as Hong Kong Chief Executive Carrie Lam gave a press conference about the demonstrations that have rocked the former British colony for three months, where she resisted protesters' calls to immediately meet the rest of their demands. The MSCI Hong Kong Index fell 1.6 per cent as of 2:56pm, extending declines after the halt in derivatives trading. It had rallied the most since 2011 on Wednesday as Lam formally withdrew a controversial extradition Bill.

"I've been doing this since 2003 and I don't recall anything like this," said Martin Wong, head of exchange-traded solutions in Asia Pacific for the equity derivatives team at BNP Paribas. "Because the futures market is closed, there is no efficient way to hedge."

Trading in September Hang Seng Index futures totalled 60,070 contracts before the suspension, down 80 per cent from the previous day. Volume in call and put options linked to the Hang Seng Index was less than 5 per cent of the 20-day average, according to data compiled by Bloomberg.

"It's very troublesome for investors as we can't hedge," said Steven Leung, executive director at UOB Kay Hian (Hong Kong) Ltd. "If something unexpected happened this afternoon, basically we are unable to respond effectively."