Opposition mounts to after-hours futures plan

Critics claim plan will hurt small brokers and lead to closures.

The Hong Kong Exchanges & Clearing Ltd.’s plan to begin after-hours futures trading in March is raising concerns it will ruin small brokerages and increase the market share of large brokerage houses.

HKEx intends to introduce a trading session from 5 p.m. to 11 p.m. for contracts on the Hang Seng Index, the Hang Seng China Enterprises Index and gold. The after-hours futures trading will need the approval of the Securities & Futures Commission.

Critics said the plan will be too much of a cost burden for the small brokers and force them to stay open and manage risk during this time period. Small brokers fear that the longer trading hours and the reinstatement of a closing auction will make them uncompetitive.

One broker described the plan as a no-win situation for small brokers. The rule change will force local brokers to expand their trading hours by the futures exchange, while the increased trade will not be able to cover the higher costs.

Representatives from the Hong Kong Securities & Futures Professionals Association, the Hong Kong Securities Professionals Association and the Hong Kong Securities & Futures Employees Union voiced their opposition to after-hours futures trading at a Hong Kong Legislative Council financial affairs meeting last January/

HKEx said, however, that the extra session will allow investors to hedge and adjust positions when news breaks during European hours.

David Friedland, managing director in Asia Pacific of broker Interactive Brokers Group Inc., said that just because some firms do not believe it will add to their bottom line does not mean Hong Kong should put on blinders and fail to compete on the global landscape.