HKEX digitizing, automating ETP processes

Hong Kong Exchanges and Clearing (0388) plans to enhance its exchange-traded products business through the digitization and automation of the in-kind creation and redemption process for ETPs this year.

Using a digital portal to replace several manual, paper-based processes, this initiative will support ETP market efficiency by lowering the operational burden for key ETP participants, according to its head of equities product development, Brian Roberts.

The launch of single stock leveraged and indexed products is just the first phase of what the exchange expects will be a number of such products to come to market, Roberts wrote in an article on the HKEX’s website.

Such products aim to deliver a daily return equivalent to a multiple of a single stock’s return.

Roberts also sees more growth potential for the virtual asset and covered call exchange-traded fund ecosystem.

The introduction of VA ETFs in December 2022 has provided regulated exposure to cryptocurrencies, boosting market liquidity and attracting a broad range of investors, he said, adding that covered call ETFs have also gained interest due to their ability to generate a potential regular income stream from option premiums and offer partial downside protection – appealing in volatile markets.

There is still ample room to expand ETF Connect, Roberts noted.

The expansion in eligibility criteria for issuers that came into effect last year has significantly broadened the scope of eligible ETFs, allowing for greater cross-border investment opportunities, he said.

It has also enabled issuers to devise more innovative and diverse ETF products for the market, Roberts pointed out.

STAFF REPORTER