What Is Hong Kong Exchanges and Clearing Limited (HKEX)?
Hong Kong Exchanges and Clearing Limited (HKEX) is a publicly traded holding company based in Hong Kong. Recognized as one of the world’s largest market operators, it was established in 2000 and manages numerous critical financial institutions, including the Hong Kong Stock Exchange (HKG) and the London Metal Exchange (LME). HKEX administers four key clearing houses in Hong Kong, thus playing a pivotal role in global financial markets.
Key Highlights
- Hong Kong Exchanges and Clearing Limited is a prominent publicly traded holding company.
- HKEX operates significant financial entities such as the Hong Kong Stock Exchange, Hong Kong Futures Exchange, and London Metal Exchange, along with four crucial clearinghouses.
- It stands as one of the world’s best-capitalized market operators.
- The primary services offered by HKEX include listing, trading, clearing, market data, reference prices, and connectivity.
- HKEX also functions as a regulatory body, overseeing trading activities of companies listed in Hong Kong and managing participants within its space.
Understanding Hong Kong Exchanges and Clearing Limited (HKEX)
HKEX is distinguished as one of the largest exchange groups globally. It seeks to connect China’s financial markets with the broader global investment community, offering investors a diverse array of products such as equities, bonds, exchange-traded funds (ETFs), real estate investment trusts (REITs), derivatives, currency futures, and commodities.
A global hub, HKEX enables capital raising for issuers from Hong Kong, China, and worldwide. Its core functions encompass listing, trading, clearing, market data provision, reference pricing, and maintaining connectivity.
HKEX came into being in 2000 via the merger of the Hong Kong Stock Exchange, Hong Kong Futures Exchange, and Hong Kong Securities Clearing Company, enhancing oversight and driving comprehensive reforms within Hong Kong’s stock and futures markets. This consolidation boosted China’s global market competitiveness. Further, in 2012, HKEX expanded its influence with the acquisition of the LME.
HKEX’s structure incorporates three integrated markets: the stock exchange, futures exchange, and LME, thus leveraging key global financial hubs in Hong Kong and London.
Notably, India’s stock market exceeded Hong Kong’s in January 2024, positioning as the fourth-largest worldwide. The aggregate value of Indian shares reached $4.33 trillion, surpassing Hong Kong’s $4.29 trillion at that period.
Special Features
HKEX operates four notable clearinghouses:
- Hong Kong Securities Clearing Company: It manages the central clearing and settlement systems.
- SEHK Options Clearing House and HKFE Clearing Corporation: These facilitate derivatives clearing.
- OTC Clearing Hong Kong: Focused on clearing over-the-counter (OTC) derivatives.
Moreover, HKEX acts as a stringent regulatory body, ensuring a well-organized and closely monitored trading environment for investors. As of January 31, 2024, HKEX boasted a market capitalization of $28.1 trillion with 2,610 listed companies.
Listing on HKEX
HKEX trades a comprehensive range of financial instruments including stocks, bonds, warrants, REITs, mutual funds, ETFs, and equity-linked instruments. To gain a listing on HKEX’s main board, companies must satisfy one of three tests:
- Profit Test: Companies need a three-year aggregate profit of HK$35 million or more and HK$45 million or more in the initial two-year aggregate.
- Market Cap and Revenue Test: Companies require recent revenue figures of HK$500 million or more and a market cap of HK$4 billion or above.
- Market Cap, Revenue, and Cash Flow Test: Companies must have latest revenue figures of HK$500 million or more, a market cap exceeding HK$2 billion, and a positive three-year aggregate cash flow of at least HK$100 million.
Additional stipulations include management continuity for three years, a minimum of 300 shareholders, and submitting semi-annual financial reports, among other prerequisites.
Frequently Asked Questions
What Is China’s Largest Stock Exchange?
The largest stock exchange in China is the Shanghai Stock Exchange (SSE). Founded in 1891, the SSE had a market capitalization of $6.52 trillion (USD) with 2,263 listed companies as of January 2024.
How Many Stock Exchanges Operate In Mainland China?
Mainland China hosts three stock exchanges: the Shanghai Stock Exchange, Shenzhen Stock Exchange, and the Beijing Stock Exchange, owned by the National Equities Exchange and Quotations. The Hong Kong Stock Exchange functions independently outside mainland China.
What Is the World’s Largest Stock Exchange?
The New York Stock Exchange (NYSE) holds the title of the world’s largest stock exchange, with a market cap of $25.56 trillion as of January 2024.
Conclusion
Hong Kong Exchanges and Clearing Limited stands as a major gateway linking Hong Kong and China’s financial markets to global investors. Through its robust subsidiaries, such as the Hong Kong Stock Exchange, and numerous essential financial assets, HKEX ensures an effective, regulated, and expansive trading landscape. One of its prominent roles encompasses managing various clearinghouses that streamline trade settlements, solidifying its fundamental place in global finance.
Related Terms: Shanghai Stock Exchange, New York Stock Exchange, Financial Regulation, London Metal Exchange, ETFs
References
- Hong Kong Exchanges and Clearing Limited. “Top Frequently Asked Questions”. Select How did HKEX develop into its existing framework?
- Bloomberg. “India Tops Hong Kong as World’s Fourth-Largest Stock Market”.
- Hong Kong Exchanges and Clearing Limited. “Securities Admission into CCASS”.
- Hong Kong Exchanges and Clearing Limited. “Overview: Listed Derivatives”.
- Hong Kong Exchanges and Clearing Limited. “Overview of OTC Clear clearing services”.
- Hong Kong Exchanges and Clearing Limited. “Our Sustainability Journey”. Select Regulator.
- Hong Kong Exchanges and Clearing Limited. “Introduction to Regulatory Framework”.
- Hong Kong Exchanges and Clearing Limited. “Monthly Market Highlights”.
- Hong Kong Exchanges and Clearing Limited. “Rules and Guidance: Chapter 8 Qualifications for Listing Basic Conditions, 8.05”.
- Hong Kong Exchanges and Clearing Limited. “Chapter 8, Equity Securities, Qualifications for Listing”. Pages 5, 9, 11-12.
- Goldman Sachs. “The Shanghai Stock Exchange Reopens in 1990”.
- World Federation of Exchanges. “Market Statistics - February 2024”.
- LSEG. “Beijing Stock Exchange”.
