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By William J. Kelly, CAIA, Founder & Managing Member, Educational Alpha LLC

 

Hong Kong’s derivatives market is experiencing an unprecedented surge, driven by heightened stock market swings and increased hedge fund activity, according to a report by Reuters citing trading data from the Hong Kong Stock Exchange.

As of March 2025, the number of outstanding futures and options contracts on the exchange reached 22 million, marking a 70% increase from last year’s record levels in just three months.

Analysts attribute the rise in derivatives trading to: a rally in Chinese technology stocks, particularly Tencent (0700.HK), Alibaba (9988.HK), and Xiaomi (1810.HK); and hedge funds using derivatives for risk management, especially in response to geopolitical tensions and tariff uncertainties.

“The surge in single stock options activity has been significant,” said Jason Lui, Head of APAC Equity and Derivatives Strategy at BNP Paribas. Call and put options have become a preferred strategy for leveraged bets while controlling downside risk.

Hong Kong Exchanges and Clearing has expanded its derivatives offerings, launching weekly options on the Hang Seng TECH Index and 10 individual stocks to meet growing investor demand.

Stock market volatility has been fuelled by China’s AI advancements, particularly the emergence of DeepSeek, a low-cost AI reasoning model, as well as President Xi Jinping’s rare meeting with tech leaders, which boosted investor sentiment.

In addition, the Hang Seng Index has risen 17% year-to-date, with Alibaba and Xiaomi surging 50% each.

Despite the rally, tariff threats from U.S. President Donald Trump continue to pose risks.

Ocean Arete, a Hong Kong-based $1 billion macro hedge fund, has increased its China equity exposure while maintaining hedges for potential volatility.

“One of the primary uncertainties we’re navigating is the US-China relationship and broader geopolitical risks,” said Yuexin Zeng, Head of Investor Relations at Ocean Arete. “Volatility will likely remain elevated for longer.”

Aspoon Capital, which reported 14% returns in the first two months of 2025, has been using China tech index put options to hedge against potential tariff shocks.

“The market may be too complacent about tariff risks,” warned Ryan Yin, Chief Investment Officer at Aspoon Capital.

According to Nick Silver, Head of Prime Services for Asia Pacific at BNP Paribas, derivatives trading has seen strong momentum over the past six months, particularly for China-related assets.

“Investors have had to become much more comfortable with trading in volatile markets,” he said. “Using derivatives remains the most efficient way to navigate uncertainty.”

Hong Kong’s derivatives market is experiencing an unprecedented surge, driven by heightened stock market swings and increased hedge fund activity, according to a report by Reuters citing trading data from the Hong Kong Stock Exchange.

As of March 2025, the number of outstanding futures and options contracts on the exchange reached 22 million, marking a 70% increase from last year’s record levels in just three months.

Analysts attribute the rise in derivatives trading to: a rally in Chinese technology stocks, particularly Tencent (0700.HK), Alibaba (9988.HK), and Xiaomi (1810.HK); and hedge funds using derivatives for risk management, especially in response to geopolitical tensions and tariff uncertainties.

“The surge in single stock options activity has been significant,” said Jason Lui, Head of APAC Equity and Derivatives Strategy at BNP Paribas. Call and put options have become a preferred strategy for leveraged bets while controlling downside risk.

Hong Kong Exchanges and Clearing has expanded its derivatives offerings, launching weekly options on the Hang Seng TECH Index and 10 individual stocks to meet growing investor demand.

Stock market volatility has been fuelled by China’s AI advancements, particularly the emergence of DeepSeek, a low-cost AI reasoning model, as well as President Xi Jinping’s rare meeting with tech leaders, which boosted investor sentiment.

In addition, the Hang Seng Index has risen 17% year-to-date, with Alibaba and Xiaomi surging 50% each.

Despite the rally, tariff threats from U.S. President Donald Trump continue to pose risks.

Ocean Arete, a Hong Kong-based $1 billion macro hedge fund, has increased its China equity exposure while maintaining hedges for potential volatility.

“One of the primary uncertainties we’re navigating is the US-China relationship and broader geopolitical risks,” said Yuexin Zeng, Head of Investor Relations at Ocean Arete. “Volatility will likely remain elevated for longer.”

Aspoon Capital, which reported 14% returns in the first two months of 2025, has been using China tech index put options to hedge against potential tariff shocks.

“The market may be too complacent about tariff risks,” warned Ryan Yin, Chief Investment Officer at Aspoon Capital.

According to Nick Silver, Head of Prime Services for Asia Pacific at BNP Paribas, derivatives trading has seen strong momentum over the past six months, particularly for China-related assets.

“Investors have had to become much more comfortable with trading in volatile markets,” he said. “Using derivatives remains the most efficient way to navigate uncertainty.”

Hedge funds are increasingly betting against major tech stocks, with Nvidia (NVDA), Tesla (TSLA), and Advanced Micro Devices (AMD) emerging as their top short targets, according to a report by Reuters citing a Morgan Stanley note released on Thursday.

The investment bank’s institutional equity division reported that Wednesday marked the third-largest day of single-stock selling by hedge funds this year, with the technology sector leading the sell-off.

According to Morgan Stanley, hedge funds predominantly increased short positions in their portfolios while making only slight reductions to long exposures. This shift highlights growing concerns about the stock market’s outlook, following two consecutive years of 20%-plus gains in the S&P 500. The index is down 2.6% year-to-date, reflecting investor anxiety over US trade policy and broader economic headwinds.

The targeted short positions in Nvidia, Tesla, and AMD suggest that hedge funds see select members of the once high-flying “Magnificent Seven” as overvalued.

Except for Meta Platforms (META), most of the Magnificent Seven stocks have underperformed the S&P 500 in 2024. Tesla has fallen more than 31%, while Nvidia is down over 16%. AMD, though not part of the Magnificent Seven, has declined more than 12% this year.

Despite the bearish sentiment, hedge funds closed out short positions in Apple (AAPL) and Alphabet (GOOGL) on Wednesday, suggesting a selective approach to their short-selling strategies.

Data from analytics firm Ortex shows that short interest in the Magnificent Seven stocks has been increasing, though it remains below early-year levels. On Tuesday, short interest in the group rose by 8% to 1.19%, before slightly retreating the next day.

Tesla has been a major target for short sellers, with short interest climbing close to 3%. The company’s shrinking market share in Europe, as reported by the European Automobile Manufacturers Association (ACEA), has added to bearish pressure. Still, Tesla’s stock gained 3.45% on Tuesday, despite the data.

Hedge funds are increasingly betting against major tech stocks, with Nvidia (NVDA), Tesla (TSLA), and Advanced Micro Devices (AMD) emerging as their top short targets, according to a report by Reuters citing a Morgan Stanley note released on Thursday.

The investment bank’s institutional equity division reported that Wednesday marked the third-largest day of single-stock selling by hedge funds this year, with the technology sector leading the sell-off.

According to Morgan Stanley, hedge funds predominantly increased short positions in their portfolios while making only slight reductions to long exposures. This shift highlights growing concerns about the stock market’s outlook, following two consecutive years of 20%-plus gains in the S&P 500. The index is down 2.6% year-to-date, reflecting investor anxiety over US trade policy and broader economic headwinds.

The targeted short positions in Nvidia, Tesla, and AMD suggest that hedge funds see select members of the once high-flying “Magnificent Seven” as overvalued.

Except for Meta Platforms (META), most of the Magnificent Seven stocks have underperformed the S&P 500 in 2024. Tesla has fallen more than 31%, while Nvidia is down over 16%. AMD, though not part of the Magnificent Seven, has declined more than 12% this year.

Despite the bearish sentiment, hedge funds closed out short positions in Apple (AAPL) and Alphabet (GOOGL) on Wednesday, suggesting a selective approach to their short-selling strategies.

Data from analytics firm Ortex shows that short interest in the Magnificent Seven stocks has been increasing, though it remains below early-year levels. On Tuesday, short interest in the group rose by 8% to 1.19%, before slightly retreating the next day.

Tesla has been a major target for short sellers, with short interest climbing close to 3%. The company’s shrinking market share in Europe, as reported by the European Automobile Manufacturers Association (ACEA), has added to bearish pressure. Still, Tesla’s stock gained 3.45% on Tuesday, despite the data.

The Fixed Income Clearing Corporation (FICC), a subsidiary of the Depository Trust & Clearing Corporation (DTCC), has launched enhanced US Treasury clearing capabilities, introducing new access models and customer margin segregation.

The move comes as market volumes and participation continue to climb, ahead of the 31 March, 2025, deadline set by the US Securities and Exchange Commission (SEC), which has extended mandatory clearing requirements for US Treasury cash and repo transactions.

FICC’s daily clearing volumes have surged past $9tn, with peaks exceeding $10.4tn in late February. This marks a significant rise from $4.5tn before the SEC proposed expanded clearing rules and $7.2 trillion when the rules were finalised in December 2023.

Buyside participation has also increased dramatically. In February, cleared buyside activity through FICC’s Sponsored Service grew 85% year-over-year, with peak volumes exceeding $2tn at the end of 2024. The service now provides the industry with more than $700bn in daily balance sheet capacity, and total balance sheet savings reached $900 billion by year-end.

The Fixed Income Clearing Corporation (FICC), a subsidiary of the Depository Trust & Clearing Corporation (DTCC), has launched enhanced US Treasury clearing capabilities, introducing new access models and customer margin segregation.

The move comes as market volumes and participation continue to climb, ahead of the 31 March, 2025, deadline set by the US Securities and Exchange Commission (SEC), which has extended mandatory clearing requirements for US Treasury cash and repo transactions.

FICC’s daily clearing volumes have surged past $9tn, with peaks exceeding $10.4tn in late February. This marks a significant rise from $4.5tn before the SEC proposed expanded clearing rules and $7.2 trillion when the rules were finalised in December 2023.

Buyside participation has also increased dramatically. In February, cleared buyside activity through FICC’s Sponsored Service grew 85% year-over-year, with peak volumes exceeding $2tn at the end of 2024. The service now provides the industry with more than $700bn in daily balance sheet capacity, and total balance sheet savings reached $900 billion by year-end.

HSBC’s London-based head of CEEMEA rates trading, Andrew Dinnis, has resigned and is expected to join an unnamed hedge fund once his notice period ends, marking another senior departure from the bank, according to a report by eFinancial Careers.

Dinnis, who has been with HSBC for 14 years, led trading for Central and Eastern Europe, the Middle East, and Africa (CEEMEA) rates. While HSBC has yet to comment on the move, Dinnis also declined to respond to inquiries.

His exit follows HSBC’s bonus payouts last week and comes amid a broader shift at the bank. While HSBC is shutting down its M&A and equity capital markets businesses in Europe and the US, Dinnis’s departure is unrelated to these closures.

Other key figures have also left HSBC in recent weeks. Nils Hansen, a managing director in the US syndicate team, recently departed, while Mark Epley, chairman of the US financial sponsors group, also announced his exit.

HSBC’s London-based head of CEEMEA rates trading, Andrew Dinnis, has resigned and is expected to join an unnamed hedge fund once his notice period ends, marking another senior departure from the bank, according to a report by eFinancial Careers.

Dinnis, who has been with HSBC for 14 years, led trading for Central and Eastern Europe, the Middle East, and Africa (CEEMEA) rates. While HSBC has yet to comment on the move, Dinnis also declined to respond to inquiries.

His exit follows HSBC’s bonus payouts last week and comes amid a broader shift at the bank. While HSBC is shutting down its M&A and equity capital markets businesses in Europe and the US, Dinnis’s departure is unrelated to these closures.

Other key figures have also left HSBC in recent weeks. Nils Hansen, a managing director in the US syndicate team, recently departed, while Mark Epley, chairman of the US financial sponsors group, also announced his exit.

Quincy Data, a global specialists launched new Transatlantic Signal Feeds distributing key CME data in London, Frankfurt, and Mumbai, providing market participants with trading indicators of large trade events for key CME futures instruments with minimal delay.

The Signal Feed latency from CME in Aurora, IL to the Slough-LD4 data centre in the UK is 23.x milliseconds one-way, enabling the fastest possible price discovery.

Quincy Data co-founder Stephane Tyc, said: “Our goal is to provide our subscribers with the fastest possible access to essential market data. Quincy leverages a broad range of advanced wireless technologies to ensure global distribution with the lowest latency.”

Quincy Data offers three categories of market data services:
Snapshot Feeds, which distribute normalised market data across more than twenty points of presence worldwide; Raw Feeds, which are optimised for distribution using high-capacity wireless; and Signal Feeds, which provide the fastest means of price discovery to geographically distant markets.

All Quincy Data services are offered on a level playing field, ensuring equal access to the lowest-latency solutions for all subscribers.

Quincy Data, a global specialists launched new Transatlantic Signal Feeds distributing key CME data in London, Frankfurt, and Mumbai, providing market participants with trading indicators of large trade events for key CME futures instruments with minimal delay.

The Signal Feed latency from CME in Aurora, IL to the Slough-LD4 data centre in the UK is 23.x milliseconds one-way, enabling the fastest possible price discovery.

Quincy Data co-founder Stephane Tyc, said: “Our goal is to provide our subscribers with the fastest possible access to essential market data. Quincy leverages a broad range of advanced wireless technologies to ensure global distribution with the lowest latency.”

Quincy Data offers three categories of market data services:
Snapshot Feeds, which distribute normalised market data across more than twenty points of presence worldwide; Raw Feeds, which are optimised for distribution using high-capacity wireless; and Signal Feeds, which provide the fastest means of price discovery to geographically distant markets.

All Quincy Data services are offered on a level playing field, ensuring equal access to the lowest-latency solutions for all subscribers.

Hedge fund Starboard Value has reignited its proxy battle with Autodesk, nominating three director candidates to the engineering and design software maker’s board, including Chief Executive Officer and Founder Jeff Smith, according to a report by Bloomberg.

The move comes as Starboard continues to push for margin growth and cost-cutting measures at the company.

Starboard’s other nominees are Geoff Ribar, former CFO of Cadence Design Systems, and Christie Simons, a senior partner at Deloitte & Touche.

Starboard, which holds a $500m stake in Autodesk, had previously cut its investment by 44% in Q4 2024, according to regulatory filings. The hedge fund argues that Autodesk overspends compared to its software peers and has underperformed the broader market.

Autodesk, with a $58bn valuation, has seen its shares fall over 7% in 2024—outpacing the S&P 500’s 1.8% decline.

In response to Starboard’s renewed push, Autodesk stated that its strategy is working, citing the addition of two independent directors in December. While the company expressed concerns about Starboard’s nomination process, it said it remains open to interviewing the hedge fund’s candidates.

Starboard’s renewed campaign follows a failed attempt last year to push its own board candidates. After losing a legal battle to reopen director nominations, the hedge fund called for leadership changes and expense reductions.

In December 2024, Autodesk responded by appointing two independent directors: John Cahill, former CEO and chairman of Kraft Foods; and Ram Krishnan, COO of Emerson.

The 13-member board is currently chaired by Stacy Smith, a former Intel executive, who also serves on the boards of Intel and Kioxia.

Hedge fund Starboard Value has reignited its proxy battle with Autodesk, nominating three director candidates to the engineering and design software maker’s board, including Chief Executive Officer and Founder Jeff Smith, according to a report by Bloomberg.

The move comes as Starboard continues to push for margin growth and cost-cutting measures at the company.

Starboard’s other nominees are Geoff Ribar, former CFO of Cadence Design Systems, and Christie Simons, a senior partner at Deloitte & Touche.

Starboard, which holds a $500m stake in Autodesk, had previously cut its investment by 44% in Q4 2024, according to regulatory filings. The hedge fund argues that Autodesk overspends compared to its software peers and has underperformed the broader market.

Autodesk, with a $58bn valuation, has seen its shares fall over 7% in 2024—outpacing the S&P 500’s 1.8% decline.

In response to Starboard’s renewed push, Autodesk stated that its strategy is working, citing the addition of two independent directors in December. While the company expressed concerns about Starboard’s nomination process, it said it remains open to interviewing the hedge fund’s candidates.

Starboard’s renewed campaign follows a failed attempt last year to push its own board candidates. After losing a legal battle to reopen director nominations, the hedge fund called for leadership changes and expense reductions.

In December 2024, Autodesk responded by appointing two independent directors: John Cahill, former CEO and chairman of Kraft Foods; and Ram Krishnan, COO of Emerson.

The 13-member board is currently chaired by Stacy Smith, a former Intel executive, who also serves on the boards of Intel and Kioxia.

Two senior G10 FX traders have exited Citigroup, with one – John Nihill, a highly regarded FX trader based in Sydney – rumoured to be joining a hedge fund, as the battle for top trading talent intensifies, according to a report by eFinancial Careers.

Sources indicate that Nihill has decided to move into the hedge fund world after nearly a decade at Citi. He was reportedly one of Citi’s top revenue generators in the APAC region.

In London, Citi has also lost Angus Yard, a VP-level FX trader who had been with the bank since 2018. Yard’s next destination remains unclear. His departure follows that of Giles Page, one of Citi’s longest-serving FX managing directors, who retired last week after announcing his exit late last year.

The exits come amid a surge in hedge fund hiring of top FX talent, with firms aggressively expanding their trading desks to capitalise on volatile currency markets. Bloomberg reported in February that banks like Citi and Wells Fargo had been expanding FX trading teams, yet Citi now finds itself needing to backfill unexpected departures.

Citi’s FX division, led by Flavio Figueiredo since 2023, has faced internal scrutiny, with some traders voicing concerns that sales backgrounds are being favored over trading expertise

Two senior G10 FX traders have exited Citigroup, with one – John Nihill, a highly regarded FX trader based in Sydney – rumoured to be joining a hedge fund, as the battle for top trading talent intensifies, according to a report by eFinancial Careers.

Sources indicate that Nihill has decided to move into the hedge fund world after nearly a decade at Citi. He was reportedly one of Citi’s top revenue generators in the APAC region.

In London, Citi has also lost Angus Yard, a VP-level FX trader who had been with the bank since 2018. Yard’s next destination remains unclear. His departure follows that of Giles Page, one of Citi’s longest-serving FX managing directors, who retired last week after announcing his exit late last year.

The exits come amid a surge in hedge fund hiring of top FX talent, with firms aggressively expanding their trading desks to capitalise on volatile currency markets. Bloomberg reported in February that banks like Citi and Wells Fargo had been expanding FX trading teams, yet Citi now finds itself needing to backfill unexpected departures.

Citi’s FX division, led by Flavio Figueiredo since 2023, has faced internal scrutiny, with some traders voicing concerns that sales backgrounds are being favored over trading expertise

US activist hedge fund firm Elliott Investment Management has built an £850m short position against Shell, marking the largest disclosed wager against the FTSE 100 oil giant in nearly a decade, according to a report by The Times.

The report cites regulatory filings with the UK’s Financial Conduct Authority (FCA) as revealing that Elliott’s 0.5% short position in Shell is the biggest since 2016, when hedge fund Davidson Kempner targeted the company.

The move comes as Elliott has amassed a near 5% stake in BP, valued at more than £3.5bn, where it is pressuring the company to cut costs and shift strategy. The hedge fund’s short position in Shell, alongside disclosed shorts in TotalEnergies and Repsol, is believed to be part of a broader hedging strategy to mitigate risks tied to its BP investment.

By shorting other major energy stocks, Elliott is protecting itself against sector-wide declines that could impact its BP position.

Elliott’s short disclosure coincided with Shell CEO Wael Sawan’s unveiling of a new cost-cutting and spending strategy aimed at closing the valuation gap between Shell and its US counterparts, Chevron and ExxonMobil.

At the same time, BP CEO Murray Auchincloss is under growing investor pressure to enhance performance and narrow BP’s valuation discount to its US rivals. Last month, Auchincloss abandoned BP’s previous green energy shift, opting to increase oil and gas production – a shift that came just weeks after Elliott’s stake in BP was disclosed.

Founded by Paul Singer in 1977, Florida-based Elliott Investment Management manages nearly $73bn in assets. Known for taking stakes in underperforming companies and pushing for strategic overhauls, Elliott has a history of leveraging the courts and shareholder activism to drive change.

The firm, which operates a major London office led by Gordon Singer, gained notoriety for its 15-year legal battle with Argentina over a debt default, eventually securing a $2.4bn settlement.

Elliott declined to comment on its position.

US activist hedge fund firm Elliott Investment Management has built an £850m short position against Shell, marking the largest disclosed wager against the FTSE 100 oil giant in nearly a decade, according to a report by The Times.

The report cites regulatory filings with the UK’s Financial Conduct Authority (FCA) as revealing that Elliott’s 0.5% short position in Shell is the biggest since 2016, when hedge fund Davidson Kempner targeted the company.

The move comes as Elliott has amassed a near 5% stake in BP, valued at more than £3.5bn, where it is pressuring the company to cut costs and shift strategy. The hedge fund’s short position in Shell, alongside disclosed shorts in TotalEnergies and Repsol, is believed to be part of a broader hedging strategy to mitigate risks tied to its BP investment.

By shorting other major energy stocks, Elliott is protecting itself against sector-wide declines that could impact its BP position.

Elliott’s short disclosure coincided with Shell CEO Wael Sawan’s unveiling of a new cost-cutting and spending strategy aimed at closing the valuation gap between Shell and its US counterparts, Chevron and ExxonMobil.

At the same time, BP CEO Murray Auchincloss is under growing investor pressure to enhance performance and narrow BP’s valuation discount to its US rivals. Last month, Auchincloss abandoned BP’s previous green energy shift, opting to increase oil and gas production – a shift that came just weeks after Elliott’s stake in BP was disclosed.

Founded by Paul Singer in 1977, Florida-based Elliott Investment Management manages nearly $73bn in assets. Known for taking stakes in underperforming companies and pushing for strategic overhauls, Elliott has a history of leveraging the courts and shareholder activism to drive change.

The firm, which operates a major London office led by Gordon Singer, gained notoriety for its 15-year legal battle with Argentina over a debt default, eventually securing a $2.4bn settlement.

Elliott declined to comment on its position.

Hedge funds are snapping up economically sensitive stocks, betting on a rebound after recent selloffs driven by tariff-related recession fears in the US market, according to a report by Bloomberg citing data from the prime brokerage unit at Goldman Sachs.

Last week, hedge funds aggressively bought shares of banks, energy producers, and other cyclical companies at the fastest pace since December. These sectors had been among the hardest hit, with one key index falling nearly 10% from its recent highs amid President Donald Trump’s shifting tariff policies and concerns over U.S. economic growth.

“This year’s weakness in cyclicals was seen by some as an opportunity to buy the dip and re-enter at a better price,” said Jonathan Caplis, CEO of PivotalPath, who noted that fund managers view US financials and traditional energy stocks as less exposed to tariff risks than other sectors.

Signs of a rebound in cyclical stocks are emerging. The KBW Bank Index posted an eight-session winning streak – its longest since 2016 – before retreating on Wednesday as fresh tariff concerns resurfaced. A Citigroup index tracking cyclical stocks against defensive sectors like utilities and healthcare has also clawed back nearly half its recent losses.

If cyclicals continue to recover, it could indicate that investors see the economic impact of tariffs as less severe than initially feared.

Some investors are watching the relationship between cyclicals and defensive stocks, which traditionally act as safe havens during economic uncertainty. Bank of America strategist Jill Carey Hall noted that last week, the bank’s clients were larger net buyers of cyclicals than defensive stocks, signalling that they aren’t positioning for an imminent recession.

However, not everyone shares this optimism. Some market participants still believe tariffs could trigger a US economic downturn, and that markets have yet to fully price in this risk, despite a 7% drop in the S&P 500 from last month’s record high.

Stuart Kaiser, Citigroup’s head of US equity trading strategy, suggested that part of the rebound in cyclical stocks may be driven by expectations that the Trump administration’s tariff policies will be more targeted and less damaging than initially feared.