Chen Haolian: The Hong Kong government is promoting a number of measures to deepen the development of the derivatives market, including product expansion and interconnection.

On June 17th, acting Financial Services and the Treasury Bureau Director Chen Haolian stated in a written response to legislators' questions in the Legislative Council that the government, together with regulatory bodies and the Hong Kong Exchanges and Clearing Limited (HKEX), is actively promoting various aspects of work, including deepening the development of derivative product markets, strengthening market infrastructure, and enriching investment options to meet the diversified asset allocation and risk management needs of domestic and overseas investors. Firstly, in terms of product development, the government, the Securities and Futures Commission, and the HKEX have been closely cooperating to promote the development of the derivative product market by introducing a variety of products and optimizing trading services. Currently, the Hong Kong market offers a diverse range of derivative instruments, including futures, options, and other structured products covering assets such as stock indices, individual stocks, exchange rates, interest rates, commodities, and more. The rapid development of innovative technology companies in recent years has also led to the introduction of new products, including Hang Seng TECH Index Futures and Options, Hang Seng Biotech Index Futures, the first batch of leveraged and inverse products on individual Asian stocks, and the first batch of US dollar-denominated American stock derivative warrants. In addition, HKEX announced in May this year the introduction of fee waivers for trading gold futures contracts in US dollars and incentive programs for liquidity providers and active traders to stimulate trading volumes of US dollar gold futures contracts in line with the development of the Hong Kong gold trading market. These arrangements will take effect from July this year. In terms of trading services, building on the after-hours trading session introduced in the derivatives market in 2013, HKEX has gradually extended trading hours to three in the morning of the following day. HKEX has also implemented holiday trading services for derivative products and included all currency futures and options products. Additionally, the government has worked with the Securities and Futures Commission to optimize the position limit regime for derivative products, increase position limits for futures and options, and remove limits on internationally related derivative products. To further promote market development, the government has amended legislation to exempt option market makers from the fixed stamp duty on securities dealing business. Driven by these measures, the average daily trading volume of futures and options reached 1.66 million contracts in 2025, a seven percent increase from 2024, setting a new record high. As of the end of May this year, the average daily trading volume for futures and options further increased to over 1.78 million contracts. Secondly, in terms of the mutual market access mechanism, the Bond Connect Northbound trading officially commenced in 2023, marking the first introduction of mutual market access arrangements in the field of derivative products. The government will continue to maintain close communication with relevant Mainland departments and actively promote and implement mutual market access measures supported by regulators from both sides, including the introduction of offshore government bond futures in Hong Kong. At the same time, discussions with Mainland departments will continue on further expansion and optimization of increment plans to facilitate two-way capital flow between the two regions, exploring the expansion of product types under mutual market access. Specific optimization measures will be announced in due course as various initiatives mature. Thirdly, in terms of settlement arrangements, the International Monetary Fund evaluated Hong Kong's financial system in 2021 under the Financial Sector Assessment Program, providing recommendations for the continued soundness of Hong Kong's financial system, including optimizing the governance structure of Hong Kong Futures Clearing Limited, suggesting that efficiency could be enhanced through the merger of HKEX's Central Clearing Corporation, Futures Clearing, and Hong Kong Securities Clearing Limited, under appropriate governance structure. In response, HKEX conducted an independent review on its overall risk management and related governance in 2021 and began implementing the recommendations in 2023 after consulting the Securities and Futures Commission. Currently, the Central Clearing, Futures Clearing, and Options Clearing under HKEX provide comprehensive settlement, delivery, custody, and agency services to participants for securities products, futures products, and options products. HKEX has been working on integrating operations and technology levels, with the development of the Linghangxing Derivatives Platform aiming to facilitate the introduction of new products in the future, enhance market microstructure, and further improve functions such as trading, clearing, and risk management. The new platform will provide customers with a better trading and settlement experience, including support for nearly 24-hour trading, the addition of new types of order types, interfaces tailored to industry needs, and improved testing and connectivity experiences. In addition, HKEX optimized its collateral arrangements in October 2025 and its cross-product collateral arrangements in futures market clearing in April 2026, including adjusting the calculation of interest paid on cash collateral to participants and reducing the financing cost for non-cash collateral. Chen Haolian stated that the government will continue to promote the enhancement of market efficiency by the Securities and Futures Commission and HKEX. Among other things, HKEX has been instructed to study the reduction of funding costs for market participants in providing collateral, including exploring the expansion of acceptable collateral types and cross-clearing house margin arrangements, with the aim of further enhancing the efficiency of collateral usage. The Securities and Futures Commission and HKEX will announce optimization arrangements in due course.