Comment or recommendation
23. Paragraph 7.49 "We recommend that the
Clearing House should endeavour to lay off some risk externally - either via a guarantee from a banking syndicate or insurance or both."
24. Paragraph 7.50 "We therefore recommend that the Clearing House should adopt a rule whereby it can call for extra deposits from Clearing Members in the event of the fund and any external guarantee being exhausted."
25. Paragraph 7.52 "We recommend that
representatives of the Clearing Members and any providers of a guarantee should sit on the Board of the Clearing House."
26. Paragraph 7.53 "Finally, we strongly recommend that early steps should be taken to introduce new guarantee arrangements so that the risks entailed in the Government assuming the credit risks in the HSI futures market are removed."
Action taken by the HKFE
it and may use the purchase
price to fund other expansion of operations of the Clearing House.
Please note that the Rules in Chapter VI of the Clearing House Rules empower the Clearing House to arrange for the necessary off-loading of risk.
Discussions are already underway in order to put arrangements of the type contemplated in place.
Please see the provisions of Rule 606 of the Clearing House Rules which reflect the provisions of this recommendation.
Please see comments in paragraph 17 above. Articles 6.01 and 6.02 of the Articles of the Clearing House permit this but the Exchange believes the rationale for this recommendation should be critically reviewed. Accordingly, in the normal course, it would not always be the case that the provider of insurance and bank cover would be on the Board. To the extent that the cover is limited in terms of the size of the Fund and the other resources of the Clearing House as a whole, it would be disproportionate to give too much emphasis or power to insurers/bankers.
The proposals whereby the Clearing House will become a counterparty and whereby a new support fund will be established are already well underway. The Government has committed support to the new Clearing House to the extent of a HKS100 million facility.