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

Hong Kong Exchanges and Clearing Limited (HKEx) is a publicly-traded holding company that is one of the largest market operators in the world. Its subsidiaries include the Stock Exchange of Hong Kong and the Hong Kong Futures Exchange. HKEx also manages four clearing houses in Hong Kong and the London Metal Exchange (LME), making it an important institution in the global financial markets.

Key Takeaways

  • Hong Kong Exchanges and Clearing Limited (HKEx) is a publicly-traded holding company that is composed of some of the largest market institutions in the world.
  • HKEx operates the Stock Exchange of Hong Kong, the Hong Kong Futures Exchange, the London Metal Exchange, and four clearing houses in Hong Kong.
  • HKEx is one of the largest and well-capitalized market operators in the world with a market cap of $41.6 trillion as of September 2020.
  • The primary services of HKEx 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.
  • To be included on Hong Kong Exchanges and Clearing Limited's (HKEx's) main board, an interested company must pass one of three tests: a profit test, a market cap and revenue test, or a market cap, revenue, and cash flow test.

Understanding Hong Kong Exchanges and Clearing Limited (HKEx)

Hong Kong Exchanges and Clearing Limited (HKEx) was created in 2000, as the result of a greater emphasis on comprehensive reform and oversight related to stock and futures markets in Hong Kong.

HKEx was formed through the merger of the Hong Kong Stock Exchange, the Hong Kong Futures Exchange, and the Hong Kong Securities Clearing Company. The merger was designed to increase China's competitiveness in the global market.

Today, the corporate structure focuses on three main markets that are integrated to form a complementary grouping. These core markets, which include two of the company’s original components, are the Stock Exchange of Hong Kong, the Hong Kong Futures Exchange, and the London Metal Exchange (LME). This current makeup allows the HKEx to position itself in a way to take advantage of two of the world’s leading financial hubs, Hong Kong and London.

As of Sept. 30, 2020, it has a market cap of $41.6 trillion with 2,518 listed companies.

Functions of Hong Kong Exchanges and Clearing Limited (HKEx)

The company is a global platform for raising capital for issuers based in Hong Kong, throughout China, and around the world. Its main services include listing, trading, clearing, market data, reference prices, and connectivity.

HKEx operates four clearing houses: SEHK Options Clearing House Limited (SEOCH), OTC Clearing Hong Kong Limited (OTC Clear), Hong Kong Securities Clearing Company (HKSCC), and HKFE Clearing Corporation Limited (HKCC).

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. The company prides itself on maintaining a well-organized and tightly-regulated marketplace for investors.

Listing on Hong Kong Exchanges and Clearing Limited (HKEx)

HKEx trades in stocks, bonds, warrants, REITs, mutual funds, exchange traded 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, a market cap and revenue test, or a market cap, revenue, and cash flow test.

The profit test requires a company to have a three-year aggregate profit of HK$50 million or more and a market cap of HK$500 million or more.

The market cap and revenue test 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.

The market cap, revenue, and cash flow test 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.