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Comment or recommendation
opens; (b) the settlement banks must be totally committed once they have indicated they will make a payment: to that end, settlement banks should enter into a written agreement with the Clearing House which makes it certain that the banks are 100% bound once they have confirmed they will credit an account; and (c) the Clearing House should run regular credit checks on its settlement banks.
32. Paragraph 8.40 "We therefore recommend
that the HKFE and the Clearing House should review the case for introducing a regular intra-day settlement if volumes and open positions build up again.
33. Paragraph 8.44 "We recommend that Brokers
should be obliged to collect a "good faith" deposit from all new customers before they execute trades on their behalf."
34. Paragraph 8.49 "We recommend that the HKFE should review its risk-based capital requirements in the light of debates elsewhere and the nature of the Hong Kong market."
35. Paragraph 8.52 "We therefore recommend
that the HKFE and its Clearing House should set limits on gross open positions on either side of the market in relation to net worth, not on net open positions relative to net worth."
36. Paragraph 8.59 "We therefore recommend
that (a) the size of the Clearing Members' fund should not be designed to cover a catastrophe e.g. a 50% default and a 30% fall; but should be set in the light of the overall risks in the market but not by a rigid formula; and (b) Members' contributions should
Action taken by the HKFE
The
recommended in (b), but this will need to be the subject of some discussion with banks. Clearing House has every intention of following the recommendation in (c).
We note and agree with this proposal and intend to keep this matter under review. New policy has already been devised and will be put into effect in due course.
This proposal is reflected in Rule 501(d).
The Report makes a number of recommendations in this respect, all of which have been discussed by the Exchange. The Exchange proposes
to bear in mind all of these recommendations; its future intention is to keep a constant and close review of the market and its Members.
Gross margining has now been in place for some months. The new Clearing House would have no intention to depart from this practice in the immediate future. Please see comments above regarding increased use of position limits.
This recommendation has already been borne in mind in reaching the decision that, in the first instance, the size of fund required by the new Clearing House is HKS100 million. Moreover, the relative purchase prices---
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