Off-exchange derivatives market opens backdoor to Shanghai exchange

Technical and regulatory hurdles are proving no match for Hong Kong’s off-exchange derivatives market as foreign funds sidestep regulatory and technical hurdles in pursuit of a chance to profit off of mainland stocks’ rally, Reuters reported. Some of the biggest global banks are already able to offer so-called “synthetic” equity products that provide clients with exposure to mainland China stocks, known as “A-shares”, using shares purchased through restricted investment quotas. Several brokers and fund managers said the vast majority of trading on the Hong Kong-Shanghai Stock Connect is happening away from Beijing’s gaze in Hong Kong’s “over-the-counter” derivatives market.