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By Jonathan Boyd
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By Rusty Braziel,
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HONG KONG EXCHANGES CEO: SLOW BUILD FOR HIGH-FREQUENCY TRADE
Dow Jones Newswires,
BOCA RATON, Fla. -(Dow Jones)- Hong Kong Exchanges & Clearing Ltd. (0388.HK) is not rushing to open its markets to high-frequency trading firms, despite their power to drive turnover in stocks and derivatives, according to the company's chief executive.
Rapid-fire electronic trading strategies "ultimately will come" to Hong Kong's markets, said HKEX CEO Charles Li, but neither the exchange nor regulators are in a hurry to tweak the market's structure to accommodate them.
"Our priority remains opening up mainland China," Li said Tuesday in an interview on the sidelines of a Futures Industry Association event.
HKEX is the world's biggest exchange company by market capitalization, thanks to its holdover securities and derivatives trade in Hong Kong, alongside key trade processing functions. The exchange has long been seen as positioned to capture investment activity coming from China as the country relaxes some market regulations.
The company has taken steps to beef up technology and late this year aims to complete the construction of a new, $1.5 billion data center that will speed Hong Kong's markets. The project will also enable electronic traders to situate their computers close to the exchanges' trade-matching engines, a feature prized by firms employing speed-reliant strategies.
Li said that regulatory impediments to high-speed trading strategies remain, however, such as a lack of anonymous trading capability and remote access to the Hong Kong platforms. A closing auction process for stocks also has yet to be fully developed, he said.
Regulators supervising HKEX have been observing the rise of electronic traders as primary providers of liquidity to exchanges in the U.S. and Europe, Li said, aiming to learn from hiccups along the way, such as the "flash crash" of May 2010.
HKEX itself is not pushing for market structure changes that would entice such computer traders, Li said, but in time regulators and the exchanges are likely to gradually make the markets more amenable to the firms' strategies.
Currently, high-frequency trade represents a "negligible" amount of trading on HKEX's markets, Li said. About 39.9 trillion shares traded on the platform last year, alongside 140.5 million futures and options contracts.
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