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. HKEX is one of the largest market operators in the world. Established in 2000, its subsidiaries include the Hong Kong Stock Exchange (HKG). HKEx also manages four clearing houses in Hong Kong as well as the London Metal Exchange (LME), making it an important institution in the global financial markets.
Key Takeaways
- Hong Kong Exchanges and Clearing Limited is a publicly traded holding company.
- HKEX operates the Hong Kong Stock Exchange, the Hong Kong Futures Exchange, the London Metal Exchange, and four clearing houses.
- It is well-capitalized and one of the world's largest market operators.
- Its primary services include listing, trading, clearing, market data, reference prices, and connectivity.
- HKEX also serves as a regulating body, overseeing the trading activities of companies listed in Hong Kong and those who participate in trading activities within its venue.
Understanding Hong Kong Exchanges and Clearing Limited (HKEX)
Hong Kong Exchanges and Clearing Limited is among the world's largest exchange groups. Its goal is to connect China with the global investment community and markets. The markets offer investors a range of products, including equities, bonds, exchange-traded funds (ETFs), and real estate investment trusts (REITs). There are also derivatives, currency futures, and commodities.
HKEX is a global platform for raising capital for issuers based in Hong Kong, China, and around the world. Its main services include listing, trading, clearing, market data, reference prices, and connectivity.
The company was established in 2000 following the merger of the Hong Kong Stock Exchange, the Hong Kong Futures Exchange, and the Hong Kong Securities Clearing Company—all of which remain subsidiaries of the company.The consolidation was the result of a greater emphasis on comprehensive reform and oversight related to stock and futures markets in Hong Kong and was designed to increase China's competitiveness in the global market. In 2012, the group acquired the LME.
The corporate structure of HKEX focuses on three main markets that are integrated to form a complementary grouping. These core markets are the stock exchange, the futures exchange, and the LME. This makeup allows HKEX to position itself to take advantage of two of the world’s leading financial hubs: Hong Kong and London.
India's stock market surpassed Hong Kong's in January 2024, making it the fourth-largest in the world. The combined value of Indian shares reached $4.33 trillion while those traded in Hong Kong hit $4.29 trillion. India's market hit the $4 trillion mark on Dec. 5, 2023.
Special Considerations
HKEX operates four clearinghouses:
- Hong Kong Securities Clearing Company, which operates the central clearing and settlement system
- SEHK Options Clearing House and HKFE Clearing Corporation for derivatives
- OTC Clearing Hong Kong for over-the-counter (OTC) derivatives
The group also serves as a regulating body, overseeing the trading activities of companies listed in Hong Kong and those who participate in trading activities within its venue. The company prides itself on maintaining a well-organized and tightly regulated marketplace for investors.
HKEX had a market capitalization of $28.1 trillion with 2,610 listed companies as of Jan. 31, 2024.
Listing on HKEX
As noted above, HKEX trades in stocks, bonds, warrants, REITs, mutual funds, ETFs, and equity-linked instruments. To be traded on HKEx's main board, a company must satisfy one of three tests:
- A profit test, which requires a company to have a three-year aggregate profit of HK$35 million or more with the first two years aggregate HK$45 million or more.
- A market cap and revenue test, which requires a company's latest revenue figures to be HK$500 million or more and to have a market cap of HK$4 billion or more.
- A market cap, revenue, and cash flow test, which stipulates that a company must have its latest revenue figures be HK$500 million or more, a market cap of HK$2 billion or higher, and a positive three-year aggregate cash flow of HK$100 million or more.
Other requirements include an interested party to have management continuity of three years, a minimum of 300 shareholders, and semi-annual financial reporting, among other requirements.
What Is China's Largest Stock Exchanges?
The largest stock exchange in China is the Shanghai Stock Exchange (SSE). It is also the country's oldest exchange. The SSE was founded in 1891 as the Shanghai Stock and Sharebrokers Association. As of January 2024, the SSE had a market cap of $6.52 trillion (USD) with 2,263 listed companies.
How Many Stock Exchanges Operate In Mainland China?
Three stock exchanges operate in mainland China. The Shanghai Stock Exchange is the largest of the three. The other two exchanges are the Shenzhen Stock Exchange and the Beijing Stock Exchange, which is owned by the National Equities Exchange and Quotations. 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). The exchange had a market cap of $25.56 trillion as of January 2024.
The Bottom Line
Hong Kong Exchanges and Clearing Limited is a holding company that Hong Kong and China's financial markets to the rest of the world. The company has several subsidiaries, including the Hong Kong Stock Exchange—one of the leading markets in Asia. Along with offering different financial assets, the company operates several clearinghouses that facilitate and settle trades.
