HKEx eyes SGX's derivatives crown with MSCI tie-up

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Americas, Emerging Markets, Asia
Thomas Blott

Hong Kong Exchanges and Clearing announced plans today to launch derivatives contracts tracking MSCI's Asia and emerging markets indices as Singapore Exchange said its licensing agreement with the US index provider would come to an end.

Under a 10-year agreement, HKEx unit Hong Kong Futures Exchange will receive a suite of MSCI equity indexes on which it will base an initial 37 futures and options contracts.

The agreement adds to pressure on SGX, which already found itself in direct competition with HKEx last year as a derivatives trading hub for Chinese A-shares after the Hong Kong bourse announced plans to launch futures contracts on the MSCI China A index, putting it in direct competition with SGX's FTSE China A50 contracts.

The Singaporean bourse, which makes around half of its revenues from derivatives, said today its licensing agreement with MSCI would not be renewed from February 2021 with the exception of the MSCI Singapore index. It estimated that this would reduce its profits for financial year 2021 by 10%–15%.

SGX shares, which were suspended this morning, closed the day down 11.6%, their largest daily fall for over a decade.

HKEx said that the introduction of the new derivatives contracts was still subject to regulatory approvals and market conditions. It said it would provide further details such as product specifications once the launch date is confirmed.