HKEx to introduce HSI Volatility Index Futures on 20 February

HKEx to introduce HSI Volatility Index Futures on 20 February

15/12/2011

Hong Kong Exchanges and Clearing Limited (HKEx) will introduce trading of HSI Volatility Index (VHSI) Futures on Monday, 20 February 2012.

The VHSI, which is compiled by Hang Seng Indexes Company Limited, measures the expected volatility of Hang Seng Index (HSI) over the next 30 days implied by HSI options prices.  The VHSI is calculated based on the Chicago Board of Options Exchange’s Volatility Index (VIX) methodology with modifications, taking into account the trading characteristics of the HSI options market.

“VHSI is a direct reflection of the level of short term volatility in the Hong Kong stock market and VHSI Futures give investors a convenient and cost-effective way to hedge and manage volatility exposure,” said HKEx’s Head of Trading Calvin Tai.  “We expect they will attract interest from investors and complement the existing options related investment products both in exchange traded and OTC markets.”

Attached below are highlights of the contract specifications that have received regulatory approval.

Contract Specifications

 Trading Symbol: VHS

Contract Multiplier: $5,000 per whole index point

Minimum Fluctuation: 0.05 index point (or $250)

Contract Months: Spot month and the next two calendar months

Position Limit: 10,000 open contracts, in any one contract month

Large Open Position: 1,000 open contracts, in any one contract month

Last Trading Day: 30 calendar days prior to the second last Business Day of the next month (For example, Last Trading Day of February 2012 contract will be 28 February 2012, i.e. 30 calendar days prior to the March expiration of Hang Seng Index options)

Final Settlement Day: The first business day after the Last Trading Day of the contract month

Final Settlement Price: The average of quotation of VHSI taken at one minute intervals between 3:30pm and up to 4:00pm on the Last Trading Day (i.e. the average of 30 readings)

Exchange Fee: $10.00 per contract per side

Market Makers will be available to provide continuous two way prices which will foster liquidity in the new product.