Futures and Options

Three-year Exchange Fund Note (EFN) futures contracts are available to bolster market liquidity by enabling market participants to hedge Hong Kong dollar interest rates. A detailed description of three-year EFN futures is linked below, along with the EFN futures daily market report.

Interest Rate Swaps

Hong Kong dollar interest rate swaps are used to manage the cost of issuing EFNs. An active market has developed in Hong Kong dollar interest rate swaps, allowing large institutional investors to change rate type. The Overnight Index Swap (OIS), which was developed by the Market Practices Committee of the Treasury Bureau, is a fixed-to-floating interest rate swap with the floating leg tied to a published index of overnight reference rates. Telerate calculates the official OIS.

Cross Currency Swaps

Hong Kong, China offers a well developed market in currency swaps.

Credit Default Swaps

The Hong Kong Monetary Authority's (HKMA) supervisory manual for credit derivatives is linked below.

Short Selling

Short selling of debt securities in over-the-counter (OTC) markets is allowed only if the seller has both the authority and capability to deliver the securities sold. Unauthorized short selling is a criminal offense. The short-selling provision of the Securities & Futures Ordinance is provided through the link below.

Only securities specified by the Hong Kong Stock Exchanges and Clearing (HKEx) as Designated Securities Eligible for Short Selling can be transacted. Exchange Fund Bills and Notes (EFBNs) are not listed. Selection criteria for short selling and a list of Designated Securities are available at the HKEx page, which is linked below. The list is revised on a quarterly basis.