The foreign exchange derivatives were more frequently traded than interest rate derivatives, as indicated by the higher ratio of the turnover to the stock.
In respect of counterparties, the majority of both foreign exchange derivatives and interest rate derivatives were traded with overseas banks.
As regards the maturity structure of contracts, nearly all of the foreign exchange derivatives had maturities of less than one year. As for interest rate derivatives, the majority (78%) had maturities of less than one year but a considerable proportion (22%) had longer maturity of over one year. This is in line with the frequent use of interest rate derivatives in hedging interest rate exposures arising from long term financial assets such as bonds.
Similar to the global pattern, the most common currency pairs for foreign exchange derivatives were US dollar/Japanese yen and US dollar/Deutschemark while for interest rate derivatives, US dollar and Japanese yen interest rates were the most common. Regarding equity and stock index derivatives, the majority had Hong Kong equities and the Hang Seng Index as the underlying assets. As regards commodity derivatives, gold was the most common underlying commodity.
For foreign exchange derivatives, forwards (including both outright forwards and foreign exchange swaps) was the most commonly traded type of contract with over 90% of turnover. As for interest rate derivatives, futures accounted for about three quarters of the turnover, followed by interest rate swaps (10%) and forward rate agreements (9%). However, options was most popular for equity and stock index derivatives (86% of outstanding notional amount) and commodity derivatives (77% of outstanding notional amount).
Background
The survey is part of a global survey in April 1995 co-ordinated by the Bank for International Settlements (BIS). For the first time questions on derivatives were added to the triennial survey of the foreign exchange market. (The results on foreign exchange activities were released in September 1995 and described in detail in an article in the November issue of the HKMA's Quarterly Bulletin.)
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