Presentation on theme: "Media Workshop On New Contingency Procedures In the Event of a Market Interruption in the Derivatives Market 7 August 2002."— Presentation transcript:
Media Workshop On New Contingency Procedures In the Event of a Market Interruption in the Derivatives Market 7 August 2002
Agenda Introduction Communication Channels Principles for the New Contingency Procedures Market Arrangements during the Afternoon Trading of HSI and MHI Futures Markets Determination of the Settlement Price Q & A
Introduction Recovery of HKATS Central System Interruption –Two modes of System Recovery in the event of a system interruption 1) Automatic Failover – System will automatically recover 2) Manual Site Failover – System cannot be recovered automatically Time to System Recovery by Manual Site Failover –45 minutes under normal situation The Procedures/Measures applied to Manual Site Failover
Two modes of System Recovery in the event of a system interruption (1) Automatic Failover –Any hardware failure will be handled with the "hot-backup” arrangement, which enables non-stop trading. (2) Manual Site Failover –When the primary site is completely down (e.g. in a power failure situation), the current site failover procedures require 45 minutes. The HKATS in the primary site and the backup site are operating in parallel. All trade data input into HKATS in the primary site will be copied to the backup site simultaneously. In the event of system problems, there will be two modes of system recovery, depending on the nature of the problem.
(2) Manual Site Failover The key Manual Site Failover procedures include: Despatch operations and application support staff to the backup site Re-configure the system to operate only at the backup site (re- configure the load-balancing arrangement between the two sites) Activate the backup derivatives clearing system Activate the backup price reporting system Restart and recover all the peripheral systems and devices for full market operations (The above procedures will be conducted concurrently) Based on a review of the available data, HKEx's time requirements are in line with other major exchanges.
Communication Channels The Exchange will utilise one or more of the following communication channels to notify Participants of the market arrangements in case of a system interruption: –Participants Email System –Stock Exchange News System –Exchange Pager System for HKFE Participants (available end of August) –Market Messages Window on HKATS (depending on the nature of the system problem) –HKATS Email System (depending on the nature of the system problem)
Communication Channels The Exchange will utilise one or more of the following communication channels to notify the news media and the public of the market arrangements in case of a system interruption: –News release distributed via email, fax and website –Emergency broadcast message on website –Response to news media enquiries –Messages to information vendors and their subscribers through the Stock Exchange News System –Messages disseminated through the Exchange News System will be posted on the HKEx website on a near real-time basis from mid-August
Principles for New Contingency Procedures in the Event of a Market Interruption Affecting the Trading of Derivatives Extension of trading applicable to HSI and MHI Futures only No extended trading in HSI Options, MSCI, HIBOR, EFN, Dow Jones Futures, Stock Futures and Options, and International Stock Futures and Options markets The extended trading will be a 15-minute session provided that the markets will not close beyond 5:00 pm
Principles for New Contingency Procedures in the Event of a Market Interruption Affecting the Trading of Derivatives No extended trading on the last trading day of the expiring HSI and MHI spot month futures contracts No Pre-market Opening Period if system fails to recover by either 8:45 am or 1:30 pm Trading to resume 30 minutes after system recovery and advance notice be given to Participants, the news media and the public as soon as practicable
Market Arrangements during the Afternoon Trading of HSI and MHI Futures Markets System Recovers at or before 3:15 pm –All markets reopen 30 minutes after the confirmed system recovery time and close as scheduled System Recovers between 3:15:01 pm and 3:30 pm –All markets, except Stock Futures and Stock Option, reopen 30 minutes after the confirmed system recovery time and close as scheduled –Stock Futures and Stock Options market will reopen on the next business day
Example 1(HSI & MHI Futures) * HKATS is interrupted in the afternoon session and recovers at or before 3:30 pm Events Time___ HKATS recovers at 3:30 pm After added 30 mins of preparation 4:00 pm Markets reopen at 4:00 pm Markets trade for another 15 mins 4:15 pm Markets close at 4:15 pm No Extended Trading Required *All markets, except Stock Futures and Stock Options, close as scheduled
Market Arrangements during the Afternoon Trading of HSI and MHI Futures Markets System Recovers between 3:30:01 pm and 4:15 pm –HSI and MHI Futures markets reopen 30 minutes after the confirmed system recovery time and trade for a fixed period of 15 minutes provided that the markets will close no later than 5:00 pm –HIBOR EFN and ISFO markets reopen 30 minutes after the confirmed system recovery time and close as scheduled –MSCI, HSI Options, Stock Options, Stock Futures and Dow Jones Futures markets reopen on the next business day System Recovers after 4:15 pm –All markets on HKATS reopen on the next business day
Example 2(HSI & MHI Futures) HKATS is interrupted in the afternoon session and recovers between 3:30 pm and 4:15 pm Events Time___ HKATS recovers at 4:00 pm After added 30 mins of preparation 4:30 pm Markets reopen at 4:30 pm Markets trade for another 15 mins to 4:45 pm Markets close at 4:45 pm Extended Trading Required
Determination of Settlement Price in Case of Extended Trading for HSI & MHI Futures The HKFE Clearing Corporation (HKCC) will provide the Settlement Price within 15 minutes after the close of the Cash market The Settlement Price is calculated by applying the previous day’s premium or discount of the futures settlement price to the cash closing price, to the current day’s cash market close Example _________________ ____Day T-1___________Day T Futures (Spot) 10,500 n.a Cash 10,550 10,820 Then Discount = 10,500 – 10,550 = - 50; and Spot month Futures Settlement Price = 10,820 - 50 = 10,770. The Settlement Price so determined will apply to the Open Interest and all trades conducted during the extended trading session, if any.