Hang Seng Index Futures and Options

(including Flexible Hang Seng Index Options )

Mini-Hang Seng Index Futures and Options

(
The Benchmark for Hong Kong Stock Market
The Hang Seng Index (HSI), the leading barometer of Hong Kong stock market, is one of the best known indices in Asia and is widely used by fund managers as their performance benchmark. Since its introduction on 24 November 1969, regular adjustments of HSI constituent stocks have been made to reflect the importance of different industry sectors and to keep track of the closer economic ties between Hong Kong and Mainland China. Despite the enormous growth in the Hong Kong stock market over the years, the HSI has been proven to be an effective tool to track the overall performance of the Hong Kong stock market. Figure 1 shows the HSI performance and figure 2 shows average daily volume of HSI Futures and Options.

19691124

Hang Seng Index

The HSI is a market capitalisation-weighted index (shares outstanding multiplied by stock price). The constituent stocks are grouped under Commerce and Industry, Finance, Properties and Utilities sectors. The constituent stock list of HSI is reviewed quarterly.

Hang Seng Index Futures and Options (including Flexible Hang Seng
Index Options)
The HSI is commonly used as the base index for variety of derivatives products. HSI futures contracts were introduced in May 1986 followed by the introduction of HSI options contracts in March 1993. Together these contracts provide investors with a set of effective instruments to manage portfolio risk. HSI futures and options have become very popular with increasing domestic and international investors' participation. Flexible Hang Seng Index Options contracts were launched in February 2010, providing flexibility in strike prices and expiry months.

(
)
19865 1993 3 20102

Mini-Hang Seng Index Futures and Options

Mini-HSI futures and options contracts were launched in October 2000 and November 2002 respectively to serve the trading and hedging needs of retail investors. Mini-HSI futures and options contracts are one-fifth the size of standard HSI futures and options contracts.
Index level

200010200211

Hong Kong Exchanges and Clearing Limited 12/F, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong 12 Tel : +852 2522 1122 Fax : +852 2295 3106 Website: www.hkex.com.hk E-mail: info@hkex.com.hk Mar 2011 20113

Figure 1: HSI Performance from Jan 2005 to Dec 2009 20051200912

No. of Contracts

Figure 2: Average Daily Volume of HSI Futures and Options

HSI Futures HSI Options

34,000 30,000 26,000 22,000 18,000 14,000 10,000 6,000

2005-01 2005-06 2005-11 2006-04 2006-09 2007-02 2007-07 2007-12 2008-05 2008-10 2009-03 2009-08 2009-12

100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000
0

2005

2006

2007

2008

2009

HSI and Mini-HSI Futures Contract Summary*: *

Hang Seng Index Futures /
Underlying Index / Contract Multiplier / Minimum Fluctuation / Contract Months / Pre-Market Opening Period / Trading Hours / Last Trading Day / Final Settlement Price / Exchange Fee /

Standard /

Mini /
HK$10 per index point / $10

Hang Seng Index /

HK$50 per index point / $50 One index point /

Spot, next calendar, & next two calendar quarter months / 8:45am - 9:15am & 1:00pm - 1:30pm 9:15am - 12:00pm & 1:30pm - 4:15pm (Closed at 4:00pm on the Last Trading Day / 4) The Business Day immediately preceding the last Business Day of the Contract Month / Average of quotations of the Hang Seng Index taken at five minute intervals during the Last Trading Day / HK$10.00 / $10.00 HK$3.50 / $3.50

HSI Options (including Flexible HSI Options) and Mini-HSI Options Contract Summary*:
( )
Hang Seng Index Options /
Underlying Index / Product Code / Contract Multiplier / Minimum Fluctuation / Contract Months /

*
Flexible / Mini /
MHI HK$10 per index point / $10

HSI

Standard /
XHS

Hang Seng Index /

HK$50 per index point / $50 One index point / Short-dated Options:- Spot, next two calendar, & next three calendar quarter months / Long-dated Options: - the next five months of June and December / European Style / Quoted in whole index points / Short-dated options / : Index points / At or above 8,000 / 8,000 Long-dated options / : Index points / At or above 19,000 / 19,000 Intervals / 200 Intervals / 1,000 In whole index points which are within +/-30% from the opening price of the spot month futures contract on the day of request, or the range of the prevailing highest and lowest strike prices available amongst the contract month requested to be created, and all other existing contract months with longer expiry terms on the day of request (whichever range is the largest) / 30% Any calendar month not further out than the longest term of expiry months that are available for trading /

Short-dated Options:- Spot, next calendar, & next two calendar quarter months /

Exercise Style / Option Premium / Strike Prices /

Short-dated options / : Index points / At or above 8,000 / 8,000

Intervals / 200

Trading Hours / Expiry Day / Official Settlement Price / Exchange Fee /

9:15am - 12:00pm & 1:30pm - 4:15pm (Closed at 4:00pm on the Last Trading Day / 4) The Business Day immediately preceding the last Business Day of the Contract Month / Average of quotations of the Hang Seng Index taken at five minute intervals during the Expiry Day / HK$10.00 / $10.00 HK$2.00 / $2.00

*Please visit the HKEx website (http://www.hkex.com.hk) for full contract specifications which may be updated from time to time and for a list of Futures Exchange Participants. * (http://www.hkex.com.hk)

Advantages of Trading HSI Futures and Options

Proven Benchmark
HSI is a benchmark for the Hong Kong stock market and yardstick of portfolio performance.

High Liquidity
The HSI futures and options markets are characterised by their trading liquidity and the active participation by both local and overseas investors.

High Cost Effectiveness

HSI futures and options are traded on a margin basis. The margin is only a fraction of the contract value.

Flexible Tool
Options are extremely versatile investment tools with unique risk and reward structures.

Efficient Markets
Standardised futures and options provide orderly, transparent and efficient markets.

Low Counterparty Risk

The HKFE Clearing Corporation Limited, an HKEx subsidiary, acts as a central counterparty to every trade executed through HKEx so the counterparty risk is minimal.

Flexible Index Options - Creation, Execution, Clearing and Settlement

-
Creation
- Exchange Participants may make requests for the creation of Flexible Index Option series with specifications as listed in the contract summary above to HKEx from market open until 30 minutes before the close of trading for index options. - A series will not be created if there is an existing standard series with the same strike price and expiry.

- 30

Execution
- Flexible Index Options must be executed through the Block Trade Facility during trading hours. Market making services are not available for Flexible Index Options. - Initiating Exchange Participants and any other Exchange Participants can enter new trades to an existing Flexible Index Option series once created. - Flexible Index Options series may be executed in combination with standard option series and futures contracts, as well as other Flexible Index Options series. However, each Flexible Index Option leg of a combination trade must be of 100 contracts or more.

- -

- 100

Clearing and Settlement

- The settlement price of Flexible Index Option series will be determined theoretically with reference to the volatilities and underlying prices derived from the market data of the standard series in accordance with the daily closing quotation determination process for daily mark-tomarket purpose. - Positions of Flexible Index Options and standard series which are sharing the same underlying will be margined on a portfolio basis. - If a standard series has the same strike price and expiration as a Flexible Index Option series, the latter will be suspended from further trading. Positions in the two series will be kept and treated separately. Exchange Participants who hold opposite positions in the two series may request the clearing house to perform an internal position close out according to the clearing house procedures.

- -

*Please visit the HKEx website for details which may be updated from time to time (http://www.hkex.com.hk/) *(http://www.hkex.com.hk/)

Information Vendors Access Codes (As of 28 February 2010)

2010228
Name AAStocks.com Ltd / ACTIV Financial Systems, Inc. HSI Futures 221000 HSI/yym.HF HSI Options 322000 Call: HSI/ym/sC.HF Put: HSI/ym/sP.HF 873101 Flexible HSI Options Mini-HSI Futures Call: XHS/ym/sC.HF Put: XHS/ym/sP.HF 837401 221004 MHI/yym.HF Mini-HSI Options 322010 Call: MHI/ym/sC.HF Put: MHI/ym/sP.HF 873141

AFE / 870785,785 Bartech (Intl) Information HSImy Network Ltd / Bloomberg / ET Net Ltd / HIA Index CT <GO> Futures menu Index Futures Quotation menu HSI

870786, 785 MHImy

HSI Index OMON <GO>

ERH HKF<GO>

HUA Index CT <GO> Futures menu Index Futures Quotation menu MHI

MHSI Index OMON <GO> Options menu Index Options Quotation menu Select MHI from Index Options List Box

Options menu Index Options Quotation menu Select HSI from Index Options List Box

Finet Holdings Ltd. / IInfocast Ltd / Quick Corp. QuotePower International Ltd / Realink Paging Ltd /

Click Futures Button Click Options Button HSI FHSI.yymm/HKF P11000 HSI PHSI.yymm*3/HKF P11300-P11305 XHS

Click Futures Button Click Options Button MHI FMHI.yymm/HKF P11004 MHI PMHI.yymm*3/HKF P11320-P11325

1.Pager FP268 Page 1 inside the icon of 2.Pager FP128 page 787 inside the icon of 0#HSI:

1. Pager FP268 Page 4-15 inside the icon of 2. Pager FP128 - Page 1701 - 1718 inside the icon of 0#HSI*.HF

1.Pager FP268 Page 2 inside the icon of 2.Pager FP128 page 789 inside the icon of 0#HMH:

Reuters Ltd, a Thomson Reuters Company / Six Telekurs Ltd

0#XHS*.HF

0#HMH*.HF

HSIym,113

Call: HSIymcs,113 Put: HSIymps,113

Call: XHSymcs,113 Put: XHSymps,113

MHIym,113

Call: MHIymcs,113 Put: MHIymps,113 From price tree + pull down menu within the trading platform (Sharp Point) / From pull-down menu (Web Futures) Alt+O MHIOmy MHI

Star Financial Limited / Tai Fook On-line Services Ltd /

HSI From price tree within the trading platform (Sharp Point) / From pull-down menu (Web Futures) HIFC HSImy

MHI From price tree within the trading platform (Sharp Point) / From pull-down menu (Web Futures) HMFC MHImy

From price tree + pull down menu within the trading platform (Sharp Point) / From pull-down menu (Web Futures) Alt+O HSIOmy HSI XHSOmy

Tele-Trend Limited / Telequote Data International Ltd / Tenfore Systems Ltd AMS Terminal /
y: Contract Year /

HSIym 785

HSIyms

XHSyms
s: Strike Price /

MHIym 785

MHIyms

m: Contract Month /

Risks of Trading Futures and Options

Futures and options involve a high degree of risk. Losses from futures and options trading can exceed your initial margin funds and you may be required to pay additional margin funds on short notice. Failure to do so may result in your position being liquidated and you being liable for any resulting deficit. You must therefore understand the risks of trading in futures and options and should assess whether they are right for you. You are encouraged to consult a broker or financial adviser on your suitability for futures and options trading in light of your financial position and investment objectives before trading.

Hong Kong Exchanges and Clearing Limited (HKEx)

All rights reserved. Nothing herein is to be construed as a recommendation to purchase or sell futures and / or options contracts or to provide investment advice. While efforts are made to ensure the accuracy of information contained in this publication, HKEx and its subsidiaries do not warrant its accuracy, timeliness, completeness or fitness for a particular purpose and do not assume any liability for any errors or omissions or any action taken on the basis of such information.