HKEX's derivatives income fell as margin-fund rebates outweighed trading gains

Hong Kong Exchanges and Clearing's record nine-month revenue included a decline in its Equity and Financial Derivatives segment, but weaker trading was not the main explanation. Reconstructing the segment's income shows that net investment income fell HK$555 million, more than its HK$406 million overall revenue-and-other-income decline. The remaining income lines together rose HK$149 million. HKEX attributes the investment-income fall mainly to increased rebates to clearing participants after changes to margin collateral arrangements. The result connects an exchange earnings decline with a disclosed benefit returned to participants, rather than treating it as proof of a shrinking derivatives franchise.[1]

The figures come from HKEX's third-quarter results for the nine months ended 30 September, released on 6 November 2026. The issuer's segment table reports revenue and other income, before transaction-related expenses, of HK$24.569 billion against HK$21.851 billion for the corresponding period of 2025. All amounts in this article use Hong Kong dollars unless specifically stated otherwise. This is a nine-month year-on-year comparison, not the third quarter considered in isolation. The distinction is important because the issuer also reported moderation in some market activity during the September quarter relative to the preceding three months.[1]

Investment income explains the derivatives decline

The derivatives detail resolves an important question left open by the segment headline. Net investment income fell from HK$2.201 billion to HK$1.646 billion. Subtracting those amounts from total segment revenue and other income leaves HK$3.095 billion in 2025 and HK$3.244 billion in 2026. That is an increase of HK$149 million, or 4.8%, in the rest of the segment's income. The HK$555 million investment-income reduction was about 137% of the HK$406 million net decline because other income provided an offset.[1]

The disclosed trading lines also moved differently. Futures Exchange derivatives trading fees rose HK$26 million to HK$1.067 billion. Stock-options trading tariffs rose HK$65 million to HK$506 million, with HKEX pointing to more activity in higher-fee tiers as well as a small increase in daily volume. In contrast, fees associated with derivative warrants, callable bull/bear contracts and warrants declined HK$35 million to HK$442 million. The issuer connects that decline to lower notional values of newly listed products, despite higher average daily turnover.[1]

Together, those three trading lines added HK$56 million. That sum helps explain the positive residual but is not its whole composition: listing fees and other revenue lines also contribute. It would be incorrect to call the HK$149 million residual a pure volume effect or to assume all derivatives products shared the same fee trend. The account reconciliation establishes the offset; the product disclosures explain why its components differ.[1]

For a clearing participant, a rebate and an exchange fee are different cash flows. A lower exchange net investment return can accompany more income passed back under margin arrangements, while trading fees still increase. The report identifies that mechanism at segment level. It does not disclose every participant's allocation, the benefit passed through by intermediaries to end customers or a complete net cost of clearing for each trading strategy. Those distinctions matter before an exchange earnings movement is used as evidence about broker or customer outcomes.[1]

Cash securities supplied most of the group increase

The Cash segment rose from HK$11.109 billion to HK$13.293 billion, a HK$2.184 billion increase. Equity and Financial Derivatives decreased from HK$5.296 billion to HK$4.890 billion, a HK$406 million contraction. Commodities increased from HK$2.275 billion to HK$2.908 billion, adding HK$633 million. Data and Connectivity added HK$167 million, reaching HK$1.835 billion, and Corporate Items increased by HK$140 million, reaching HK$1.643 billion. The five changes sum exactly to HK$2.718 billion. That bridge identifies the offsetting movements that are invisible in a consolidated twelve-percent growth rate.[1]

HKEX's Cash segment covers cash securities operations and associated revenue. Its performance can reflect trading, clearing, listing and investment income, so the segment total is broader than securities trading commissions. This comparison uses revenue and other income before transaction-related expenses throughout. Cash contributed HK$13.293 billion in 2026, or about 54.1% of the group total, compared with roughly half a year earlier.[1]

The contribution-to-growth calculation is straightforward: divide the Cash segment's HK$2.184 billion year-on-year addition by the HK$2.718 billion addition across the group. The result is about 80.4%. This is a share of the increase, not a share of all group revenues. Cash represented about 54.1% of the current nine-month revenue and other income total. Confusing those two percentages would make the group appear more concentrated than the underlying numbers justify. A business can account for approximately half the revenue stock but more than four-fifths of the incremental growth.[1]

The negative contributor also has an informative denominator. Equity and Financial Derivatives' HK$406 million decrease amounts to roughly 14.9% of the group's HK$2.718 billion overall increase, but in the opposite direction. Had that segment merely held its previous level, with everything else unchanged, the group's increase would have been HK$3.124 billion rather than HK$2.718 billion. This is a counterfactual arithmetic exercise, not a forecast of how trading participants would behave. It illustrates the size of an offset.[1]

Commodity-market revenue is the second major positive mover, adding HK$633 million. On the consolidated net-growth denominator, that is about 23.3%. Those contribution percentages can add to more than 100% when there is a negative segment contribution, and that is not a mathematical flaw. They are signed components of a bridge, rather than slices of a revenue pie. Including Cash, Commodities, Data and Corporate Items produces HK$3.124 billion of positive changes, partly offset by the HK$406 million negative derivative movement.[1]

Transaction expenses and profitability require another bridge

HKEX separately reports transaction-related expenses. Its five segments generated HK$24.569 billion of revenue and other income before HK$204 million of such costs in the nine months of 2026, producing HK$24.365 billion after those expenses. The corresponding 2025 amounts were HK$21.851 billion, HK$234 million of expenses and HK$21.617 billion net. The net-of-transaction-expenses increase was therefore HK$2.748 billion, slightly larger than the HK$2.718 billion gross increase because associated expenses fell by HK$30 million. The two growth figures refer to different bases.[1]

The difference is particularly relevant to the derivatives segment. That segment's revenue and other income fell from HK$5.296 billion to HK$4.890 billion, while its transaction-related expenses fell from HK$226 million to HK$195 million. Its after-expense revenue therefore declined from HK$5.070 billion to HK$4.695 billion, a HK$375 million decrease. Both measures show a contraction, but not the same amount. A rigorous comparison should not mix a derivatives after-expense figure with a cash before-expense figure in the same growth calculation.[1]

EBITDA adds a third basis. The group reported segment EBITDA totalling HK$19.610 billion for the nine months versus HK$17.164 billion previously, an increase of HK$2.446 billion. The Cash segment's EBITDA rose from HK$10.118 billion to HK$12.220 billion, while the derivatives segment's EBITDA declined from HK$4.339 billion to HK$3.878 billion. Costs and other income below segment revenue matter. The EBITDA bridge helps explain the operating leverage of exchange activities, but EBITDA is neither cash held nor a substitute for a full audited cash-flow statement.[1]

Expense movements also have comparability complications. HKEX describes higher staff and information-technology costs, but notes that the prior-year comparison includes a HK$90 million UK FCA fine connected to the 2022 nickel-market events and the current period includes receipt of a HK$24 million related insurance claim. Those are identified historical items, not a generalised measure of improving controls. They caution against assuming every reported cost improvement came from a permanently lower operating expense base. A clean underlying trend would require specifying the treatment of those items.[1]

Record nine months did not mean uninterrupted quarterly acceleration

A separate period comparison shows why a record accumulated over nine months should not be extrapolated into the next quarter. HKEX's third-quarter revenue and other income were approximately HK$7.867 billion, below the approximately HK$8.499 billion reported for the second quarter. Profit also moderated relative to the preceding quarter. The figures are consistent with vigorous activity through the year combined with a slower quarter after a particularly strong spring and summer. Neither the year-on-year nine-month record nor the sequential moderation cancels the other.[1]

The company's market statistics provide the underlying context: trading activity in Hong Kong securities markets was exceptionally strong across the year, even though average daily turnover was lower in the September quarter than in the June quarter. A small decline from an unusually high base can coexist with a substantial year-on-year gain. Trading volume, exchange fees and revenue are related but not interchangeable. Fee schedules, product mix, effective prices, rebates, clearing and interest income also influence revenue. This article does not calculate execution quality or a per-trade broker charge from consolidated HKEX revenue.[1]

Commodities add a jurisdictional caveat. HKEX is the parent of a group containing the London Metal Exchange and other businesses. Its commodities segment is not simply the revenue of one exchange membership entity or the turnover of Hong Kong-listed commodity products. Analysts comparing commodity performance with a UK-regulated exchange or a broker's commodities division must map the corporate perimeter and accounting period first. The nickel-market cost references also belong to a specific historical regulatory event, not a finding about current commodity trading.[1]

What this means for broker economics

A Hong Kong securities broker's reported commission revenue may correlate with local turnover; an exchange's cash-market revenue may capture other elements of the market infrastructure. Neither entity's revenue automatically provides the other's margin. The apparent strength of the Cash segment therefore signals a market opportunity and possible operating exposure, not proof that brokers themselves gained 19.7% revenue. Brokerage commission rates, clearing costs, rebates, settlement expenses and client acquisition costs can offset transaction growth.[1]

Which part of the record is likely to persist?

The next results can test two separate sensitivities. Cash-market income depends on the mix and level of securities activity and associated services. Derivatives income also depends on margin-fund returns and rebates as well as contract activity and tariffs. The group's record can persist under different combinations of those drivers, but its nine-month segment composition cannot predict the next quarter. A useful follow-up would hold the income definitions constant and distinguish changes in activity from changes in the amount retained on collateral.[1]

The reconciliation is consequently more informative than either the record group total or the negative derivatives headline alone. Cash supplied HK$2.184 billion of the group's HK$2.718 billion revenue-and-other-income increase. Within derivatives, higher income outside the investment line partly absorbed a HK$555 million reduction in net investment income, which HKEX links mainly to increased participant rebates. The published accounts explain both the location of growth and why a segment could earn less while trading activity increased.[1]

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