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Hong Kong Exchanges and Clearing Limited (HKEX; , also 香港交易所 or 港交所 ) operates a range of equity, commodity, fixed income and currency markets through its wholly owned subsidiaries
The Stock Exchange of Hong Kong Limited
The Stock Exchange of Hong Kong (SEHK, also known as Hong Kong Stock Exchange) is a stock exchange based in Hong Kong. As of the end of 2020, it has 2,538 listed companies with a combined market capitalization of HK$47 trillion. It is repo ...
(SEHK),
Hong Kong Futures Exchange
Hong Kong Futures Exchange (HKFE) is a futures exchange in Hong Kong. Established in 1976, it offered a variety of options and futures contracts, linked to stock market indices, stocks, short-term interest rates, and foreign exchange. HKFE is a su ...
Limited (HKFE) and
London Metal Exchange
The London Metal Exchange (LME) is a futures and forwards exchange with the world's largest market in standarised forward contracts, futures contracts and options on base metals. The exchange also offers contracts on ferrous metals and precious ...
(LME).
With a total
market capitalisation
Market capitalization, sometimes referred to as market cap, is the total value of a publicly traded company's outstanding common shares owned by stockholders.
Market capitalization is equal to the market price per common share multiplied by t ...
of over US$6 trillion as of 2021, HKEX is the sixth largest stock exchange by market capitalization of listed companies. As of the end of December 2020, there were 2,538 companies
listed on HKEX's securities market. HKEX has been the world's top listing venue in terms of IPO funds raised in seven of the past 11 years.
The Group also operates four clearing houses in Hong Kong: Hong Kong Securities Clearing Company Limited (HKSCC), HKFE Clearing Corporation Limited (HKCC), the SEHK Options Clearing House Limited (SEOCH) and OTC Clearing Hong Kong Limited (OTC Clear). HKSCC, HKCC and SEOCH provide
integrated clearing,
settlement
Settlement may refer to:
*Human settlement, a community where people live
*Settlement (structural), the distortion or disruption of parts of a building
* Closing (real estate), the final step in executing a real estate transaction
*Settlement (fin ...
, depository and nominee activities to their participants, while OTC Clear provides
OTC interest rate derivative
In finance, an interest rate derivative (IRD) is a derivative whose payments are determined through calculation techniques where the underlying benchmark product is an interest rate, or set of different interest rates. There are a multitude of diff ...
s and
non-deliverable forward
In finance, a non-deliverable forward (NDF) is an outright forward or futures contract in which counterparties settle the difference between the contracted NDF price or rate and the prevailing spot price or rate on an agreed notional amount. It is ...
s clearing and settlement services to its members. HKEX provides market data through its data dissemination entity, HKEX Information Services Limited
The
Hong Kong Government
The Government of the Hong Kong Special Administrative Region, commonly known as the Hong Kong Government or HKSAR Government, refers to the Executive (government), executive authorities of Hong Kong Special administrative regions of China, ...
is the single largest shareholder in HKEX, and has the right to appoint six of the thirteen directors to the board.
History
Securities market
Reports of securities trading in Hong Kong date back to the mid-19th century. However, the first formal market, the Association of Stockbrokers in Hong Kong, was not established until 1891. The Association was renamed the Hong Kong Stock Exchange in 1914.
A second exchange, the Hong Kong Stockbrokers' Association was incorporated in 1921. The two exchanges merged to form the Hong Kong Stock Exchange in 1947 and re-establish the stock market after the Second World War.
Rapid growth of the Hong Kong economy led to the establishment of three other exchanges - the Far East Exchange in 1969; the Kam Ngan Stock Exchange in 1971; and the Kowloon Stock Exchange in 1972.
Pressure to strengthen market regulation and to unify the four exchanges led to the incorporation of SEHK, the Stock Exchange of Hong Kong Limited in 1980. The four exchanges ceased business on 27 March 1986 and the new exchange commenced trading through a computer-assisted system on 2 April 1986. Prior to the completion of the merger with HKFE in March 2000, the unified stock exchange had 570 participant organisations.
Hong Kong Securities Clearing Company Limited was incorporated in 1989. It created
CCASS
Hong Kong Exchanges and Clearing Limited (HKEX; , also 香港交易所 or 港交所 ) operates a range of equity, commodity, fixed income and currency markets through its wholly owned subsidiaries The Stock Exchange of Hong Kong Limited (SEHK ...
, the central clearing and settlement system, which started operating in 1992 and became the central counterparty for all CCASS participants. The clearing operation is based on the immobilisation of share certificates in a central depository. Share settlement is on a continuous net settlement basis by electronic book entry to participants' stock accounts in CCASS. Transactions between CCASS participants are settled on T+2, the second trading day following the transaction.
The company also offers nominee service.
Penny stocks fiasco
In April 2002, HKEX launched a study to consider the delisting of "
penny stock
Penny stocks are common shares of small public companies that trade for less than one dollar per share.
The U.S. Securities and Exchange Commission (SEC) uses the term "Penny stock" to refer to a security, a financial instrument which represents a ...
s" to improve market efficiency. Its 25 July 2002 proposal to cancel listings of companies trading below HK$0.50 for 30 straight days hit penny stocks hard. Seventeen companies' shares lost more than 30 per cent of their value, and about HK$6 billion in market capitalisation was wiped off 105 listed companies.
Activist David Webb said that HKEX's desire to delist stemmed from these companies generating very little revenue for the exchange but taking up a disproportionate amount of staff resources. Webb decried the conflict of interest between its role as operator and regulator, and called on the regulatory role to be passed to the
SFC.
[
On 10 September 2002, a government report was released which found HKEX Chief Executive Kwong Ki-chi guilty of administrative mistakes and said he "should be held responsible on behalf of the HKEX for any major policy shortcomings in the preparation and release of the consultation paper".
]
Derivatives market
Established in 1976, the Hong Kong Commodity Exchange (the predecessor of Hong Kong Futures Exchange Limited) is a derivatives leader in the Asia-Pacific region. The main products traded on the commodity exchange were cotton futures, sugar futures, soybean futures and gold futures. The Hong Kong Commodity Exchange was renamed the Hong Kong Futures Exchange (HKFE) on 7 May 1985.
HKFE launched on 6 May 1986 its flagship product, the HSI Futures, which is still its most popular futures product in HKEX’s derivatives markets today. HKFE provides efficient and diversified markets for trading futures and options contracts by its more than 160 participant organisations, including many that are affiliated to international financial institutions. The derivatives market under HKEX trades a broad range of products, including equity index, stock and interest rate.
HKEX and its subsidiary companies, HKFE Clearing Corporation Limited and SEHK Options Clearing House Limited, operate rigorous risk management system which enables participants and their clients to meet their investment and hedging needs in a liquid and well-regulated market place.
OTC Clearing Hong Kong Limited (OTC Clear) was incorporated as a subsidiary of HKEX in May 2012 for the purpose of acting as the clearing house for OTC derivatives in Hong Kong. Subsequently, HKEX, under the founding member programme, invited 12 financial institutions as founding members of OTC Clear, who in total hold 25 per cent of issued share capital in OTC Clear (in the form of non-voting ordinary shares) whilst HKEX holds the remaining 75 per cent. HKEX continues to hold 100 per cent of the voting ordinary shares of OTC Clear.
OTC Clear started offering OTC derivatives clearing services in November 2013. OTC Clear created OCASS, the OTC Clearing and Settlement System, for OTC Derivatives clearing and became the central counterparty for all clearing members. OTC Clear is currently providing clearing and settlement services interest rate swaps and non-deliverable forward products.
Base metals market
In June 2012, HKEX announced its cash offer to acquire the London Metal Exchange
The London Metal Exchange (LME) is a futures and forwards exchange with the world's largest market in standarised forward contracts, futures contracts and options on base metals. The exchange also offers contracts on ferrous metals and precious ...
(LME), the world's premier metal exchange since its founding in 1877, for GBP1.388 billion. The acquisition was completed in December 2012.
HKEX is also the majority owner of the Qianhai Mercantile Exchange, a commodities trading platform in Mainland China which has yet to officially begin operations. The Qianhai Authority has given the green light to HKEX to set up the commodities platform in the special economic zone, but official crackdowns on spot trading platforms in Mainland China have caused a delay.
Merger speculation
After the New York Stock Exchange
The New York Stock Exchange (NYSE, nicknamed "The Big Board") is an American stock exchange in the Financial District of Lower Manhattan in New York City. It is by far the world's largest stock exchange by market capitalization of its listed c ...
announced in November 2006 that it would open an office in Beijing to work with the Shanghai Stock Exchange
The Shanghai Stock Exchange (SSE) is a stock exchange based in the city of Shanghai, China. It is one of the three stock exchanges operating independently in mainland China, the others being the Beijing Stock Exchange and the Shenzhen Stock Exc ...
, Hong Kong Exchanges and Clearing chairman Ronald Arculli dampened speculation, saying it has no immediate plans to acquire or merge with other exchanges, but would focus on "strengthening our competitiveness and reviewing our listing fees".
In September 2019 Hong Kong Exchanges and Clearing made a proposal to the London Stock Exchange to merge the two companies in a cash and share deal worth £29.6 billion, or £31.6 billion ($39 billion) including debt. If the deal had gone through, the combined exchange would have been the world's third largest after the New York Stock Exchange and NASDAQ in terms of the total value of the companies on the exchanges.
Infrastructure
Computers were integrated on 2 April 1986, which has helped modernise the system. In 1993 the exchange launched the " Automatic Order Matching and Execution System" (AMS) that was replaced by the third generation system (AMS/3) in October 2000. Systems as such were added to meet the increased popularity of online stock trading.
Trading hours
HKEX's morning session runs from 09:00 am to 12:00 pm; the extended morning session is from 12:00 pm until 1:00 pm and the afternoon session is from 1:00 pm to 4:00 pm.
HKEX implemented a Closing Auction Session (CAS) in two phases on 25 July 2016 and 24 July 2017. The securities eligible for the CAS include all constituents of the Hang Seng Composite LargeCap, MidCap and SmallCap indices, H shares which have corresponding A shares listed on a mainland exchange and all exchange traded funds. It also includes some regulated short-selling orders.
A Volatility Control Mechanism (VCM), which functions similarly to circuit breakers on US exchanges, was implemented in two phases on 22 August 2016 and 16 January 2017.
Products
Major securities products include equity securities, depositary receipts, debt securities, unit trusts/mutual funds (i.e. ETFs and REITs) and structured products. Derivative products include index and stock futures and options, interest rate and fixed income products and gold futures.
Government share purchase
In September 2007, the government revealed that it had increased its stake in HKEX from 4.41 percent to 5.88 percent. According to market sources, the Government spent HK$2.44 billion to buy 15.72 million shares in the company. The stake would be held by the Exchange Fund as a "strategic asset".
The move has drawn widespread criticism in Hong Kong and abroad: governance advocate and board member David Webb said that the government was the second-largest single investor in the Hong Kong market after Beijing, with a portfolio of local equities estimated to be worth about HK$150 billion. He said the purchase violated the government's stated principle of "big market, small government", adding that it increased uncertainty and sends a very negative signal to the market as a whole;[Benjamin Scent]
Exchange face-off
, The Standard, 11 September 2007 the Civic Party
The Civic Party (CP) is a pro-democracy liberal political party in Hong Kong. It is currently chaired by barrister Alan Leong.
The party was formed in 2006 on the basis of the Basic Law Article 45 Concern Group, which was derived from the B ...
criticised the Government for damaging public confidence in the capital market, and interfering with the stock exchange's independence; a ''Wall Street Journal
''The Wall Street Journal'' is an American business-focused, international daily newspaper based in New York City, with international editions also available in Chinese and Japanese. The ''Journal'', along with its Asian editions, is published ...
'' editorial said that the Hong Kong Government is further interfering in the market to "cozy up to China's tightly controlled domestic exchanges". Financial commentator Jake van der Kamp noted the Financial Secretary's conundrum: The government is faced with a conflict of interest
A conflict of interest (COI) is a situation in which a person or organization is involved in multiple interests, financial or otherwise, and serving one interest could involve working against another. Typically, this relates to situations i ...
, as its desire for an efficient marketplace is contrary to its desire as a shareholder, who would prefer to maximise returns.
The government said that it wanted to play a positive role in the stock exchange's development as a shareholder. Analysts expect the government will continue to increase its stake, as HKEX is being prepared "for future integration and alliance with mainland exchanges". Another analyst was concerned about the independence of "independent chairman" Ronald Arculli, who also sits on the Executive Council.[
]
Regulation to extend directors' trading blackout
Between 11 January 2008 and 7 April 2008, HKEX launched a consultation paper proposing changes to the Listing Rules "to address 18 substantive policy issues pertaining to corporate governance and initial listing criteria". On 28 November 2008, new rules were announced which included, ''inter alia'', limitation of directors' trading in their companies' shares between the end of each semester until after publication of its results. The Listing Rule amendments were due to become effective on 1 January 2009. The previous blackout period is within one month of publication, and was considered by HKEx to "fail to ensure that insiders do not abuse the market while in possession of unpublished price-sensitive information".
In mid-December, legislators
A legislator (also known as a deputy or lawmaker) is a person who writes and passes laws, especially someone who is a member of a legislature. Legislators are often elected by the people of the state. Legislatures may be supra-national (for ex ...
representing the functional constituencies
A functional constituency is an electoral device (a non-geographical constituency) used within the political systems of two Special Administrative Regions of the People's Republic of China:
* Functional constituency (Hong Kong)
* Functional cons ...
, led by Abraham Razack
Abraham Shek Lai-him GBS JP or Abraham Razack (; born Razack Ebrahim Abdul; 24 June 1945) is a former member of the Legislative Council of Hong Kong (Legco), representing the real estate and construction industry in a functional constituency se ...
, Chim Pui Chung and David Li
Sir David Li Kwok-po (; born 13 March 1939, London, England) is a Hong Kong banker and politician. He is the Executive Chairman of the Bank of East Asia and Pro-Chancellor of the University of Hong Kong. He was a member of the Legislative ...
, demanded that regulators postponed the execution of a prolonged blackout proposal. Razack said HKEx did not consult widely enough and the process was a "black- box operation" that did not reflect industry opinion; David Webb said that the campaign was due to some well-connected tycoons and company directors' rearguard action to derail the rule change. On 30 December 2008, the Listing Committee said it would not withdraw the new rule because it would "have a long-term benefit on the market. However it postponed the rules' introduction by three months."
Senior leadership
Chairmen
Chief Executives
CEO's alleged involvement in "princeling" hirings
In 2015, the ''Wall Street Journal'' reported that the CEO of the exchange at the time, Charles Li, while he was chairman of JP Morgan China from 2003 to 2009, recommended hiring the children and associates of Chinese officials, clients and potential future clients. At the time, JP Morgan was investigated by the US Securities and Exchange Commission
The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929. The primary purpose of the SEC is to enforce the law against market ...
and the US Department of Justice
The United States Department of Justice (DOJ), also known as the Justice Department, is a federal executive department of the United States government tasked with the enforcement of federal law and administration of justice in the United State ...
into possible violation of anti-bribery laws by improperly hiring relatives of Chinese officials, known as " princelings", to win business.
See also
* Hang Seng Index
The Hang Seng Index (HSI) is a freefloat-adjusted market- capitalization-weighted stock-market index in Hong Kong. It is used to record and monitor daily changes of the largest companies of the Hong Kong stock market and is the main indicator ...
* Economy of Hong Kong
The economy of Hong Kong is a highly developed free-market economy. It is characterised by low taxation, almost free port trade and a well-established international financial market. Its currency, called the Hong Kong dollar, is legally issue ...
* List of Chinese companies
Since the introduction of economic reforms in 1978, China has become one of the world's fastest-growing major economies. , it was the world's second-largest economy by nominal GDP and largest by purchasing power parity (PPP). China was also th ...
* Companies listed on the Hong Kong Stock Exchange
This is a list of companies on the Hong Kong Stock Exchange (HKEx), ordered numerically by stock code. The names of the companies appear exactly as they do on the stock exchange listing. This is not an exhaustive list, but reflects the list th ...
* List of East Asian stock exchanges
This is a list of Asian stock exchanges.
In the Asian region, there are multiple stock exchanges. As per data from World Federation of Exchanges, below are top 10 selected in 2020:
* Shanghai Stock Exchange, China
* Tokyo Stock Exchange, Japan
...
* List of stock exchanges
This is a list of major stock exchanges. Those futures exchanges that also offer trading in securities besides trading in futures contracts are listed both here and in the list of futures exchanges.
There are sixteen stock exchanges in the world ...
* :Companies of Hong Kong
References
External links
*
Hong Kong Exchanges and Clearing Limited
{{Authority control
Financial services companies established in 2000
Companies listed on the Hong Kong Stock Exchange
Finance in Hong Kong
2000 establishments in Hong Kong
Companies in the Hang Seng Index
Central securities depositories
Securities clearing and depository institutions
Futures exchanges
Stock exchanges in Hong Kong