What Is Hong Kong Exchanges and Clearing Limited (HKEX)?

What Is Hong Kong Exchanges and Clearing Limited (HKEX)?

I'm here to explain Hong Kong Exchanges and Clearing Limited (HKEX) directly to you. It's a publicly traded holding company based in Hong Kong, and it's one of the largest market operators globally. Formed in 2000, its subsidiaries include the Hong Kong Stock Exchange (HKG). HKEX also runs four clearing houses in Hong Kong and the London Metal Exchange (LME), positioning it as a key player in worldwide financial markets.

Key Takeaways

Let me lay out the essentials for you. HKEX is a publicly traded holding company that operates the Hong Kong Stock Exchange, the Hong Kong Futures Exchange, the London Metal Exchange, and four clearing houses. It's well-capitalized and ranks among the world's largest market operators. The primary services it offers include listing, trading, clearing, market data, reference prices, and connectivity. Additionally, HKEX acts as a regulating body, overseeing trading activities for listed companies in Hong Kong and participants in its venues.

Understanding Hong Kong Exchanges and Clearing Limited (HKEX)

You should know that HKEX stands as one of the world's largest exchange groups. Its mission is to link China with the global investment community and markets. The platforms under HKEX provide investors with various products, such as equities, bonds, exchange-traded funds (ETFs), and real estate investment trusts (REITs). You'll also find derivatives, currency futures, and commodities available.

HKEX serves as a global platform for issuers in Hong Kong, China, and internationally to raise capital. Its core services cover listing, trading, clearing, market data, reference prices, and connectivity.

The company came into being in 2000 from the merger of the Hong Kong Stock Exchange, the Hong Kong Futures Exchange, and the Hong Kong Securities Clearing Company, all of which are still subsidiaries. This merger stemmed from reforms aimed at enhancing oversight in Hong Kong's stock and futures markets to boost China's global competitiveness. In 2012, HKEX acquired the LME.

HKEX's corporate structure centers on three integrated main markets: the stock exchange, the futures exchange, and the LME. This setup allows HKEX to leverage two major financial hubs—Hong Kong and London.

Important Market Update

Here's a key fact you need to note: In January 2024, India's stock market overtook Hong Kong's, becoming the fourth-largest globally. The combined value of Indian shares reached $4.33 trillion, while Hong Kong's hit $4.29 trillion. India crossed the $4 trillion mark on December 5, 2023.

Special Considerations

HKEX operates four clearing houses, which I'll detail for you. There's the Hong Kong Securities Clearing Company, handling the central clearing and settlement system. Then, the SEHK Options Clearing House and HKFE Clearing Corporation manage derivatives. Finally, OTC Clearing Hong Kong deals with over-the-counter (OTC) derivatives.

Beyond that, HKEX functions as a regulating body, monitoring trading activities of Hong Kong-listed companies and participants in its venues. The company maintains a well-organized and strictly regulated marketplace for investors.

Fast Fact

As of January 31, 2024, HKEX had a market capitalization of $28.1 trillion and 2,610 listed companies.

Listing on HKEX

HKEX trades in stocks, bonds, warrants, REITs, mutual funds, ETFs, and equity-linked instruments. If you're considering listing on HKEX's main board, a company must meet one of three tests. The profit test requires a three-year aggregate profit of HK$35 million or more, with the first two years aggregating HK$45 million or more. The market cap and revenue test demands latest revenue of HK$500 million or more and a market cap of HK$4 billion or higher. The market cap, revenue, and cash flow test calls for latest revenue of HK$500 million or more, a market cap of HK$2 billion or higher, and positive three-year aggregate cash flow of HK$100 million or more.

Other requirements include management continuity for three years by an interested party, at least 300 shareholders, and semi-annual financial reporting, among others.

What Is China's Largest Stock Exchange?

The largest stock exchange in China is the Shanghai Stock Exchange (SSE), which is also the oldest. Founded in 1891 as the Shanghai Stock and Sharebrokers Association, the SSE had a market cap of $6.52 trillion (USD) with 2,263 listed companies as of January 2024.

How Many Stock Exchanges Operate In Mainland China?

Three stock exchanges operate in mainland China. The Shanghai Stock Exchange is the largest. The others are the Shenzhen Stock Exchange and the Beijing Stock Exchange, owned by the National Equities Exchange and Quotations. Note that the Hong Kong Stock Exchange operates independently outside mainland China.

What Is the World's Largest Stock Exchange?

The world's largest stock exchange is the New York Stock Exchange (NYSE), with a market cap of $25.56 trillion as of January 2024.

The Bottom Line

In summary, Hong Kong Exchanges and Clearing Limited connects Hong Kong and China's financial markets to the world. It has several subsidiaries, including the Hong Kong Stock Exchange, a leading Asian market. Besides offering various financial assets, HKEX runs clearing houses that facilitate and settle trades.