HKEx to introduce three-year EFN futures

Hong Kong Exchanges and Clearing (HKEx) plans to introduce three-year exchange fund note (EFN) futures contracts on November 12, subject to the approval of the Hong Kong regulator, the Securities and Futures Commission.

The EFNs, issued by the local government, serve as monetary policy instruments for the Hong Kong Monetary Authority, and help to establish the benchmark yield curve for the Hong Kong dollar debt market. There were HK$39.70 billion worth ($5.10 billion) of EFNs outstanding in August this year, and their average daily turnover was HK$2.15 billion.

"We are introducing three-year EFN futures to provide hedging and trading tools for participants in the Hong Kong dollar interest rate market," said Frederick Grede, chief operating officer of HKEx. "EFN futures will complement our stock, stock index, currency and interest rate products and expand our wide range of financial futures contracts."

HKEx has also planned the introduction of a block trading facility (BTF) on HKATS, the Hong Kong Futures Automated Trading System by October 29, under a six-month pilot programme.

Block trades comprise of large buy and sell orders privately negotiated apart from the public auction. HKEx believes the BTF will provide clearing house guarantees for transactions otherwise executed over-the-counter, price and execution certainty for large deals, and added liquidity and contract standardisation.