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056754 MDLIAN 2929
8. THE STOCK EXCHANGE IS WORKING ON PROPOSALS TO EXTEND THE SETTLEMENT PERIOD AND ESTABLISH A CENTRAL CLEARING SYSTEM. IN VIEW
THE OF THE TECHNICAL COMPLEXITY AND OPERATIONAL DETAILS INVOLVED, NEGOTIATIONS AMONG CONCERNED PARTIES, IN PARTICULAR THE EXCHANGE ITSELF AND THE BANKS WILL TAKE TIME: BUT THE EXCHANGE HAS
TO ADOPTED, AS A MATTER OF URGENCY, NECESSARY INTERIM MEASURES IMPROVE THE OPERATION OF THE MARKET. THE GOVERNMENT WILL CLOSELY MONITOR THE SITUATION TO ENSURE THAT THE NEW ARRANGEMENTS WILL ADD TO THE INTEGRITY AND EFFICIENCY OF THE SECURITY MARKETS. IT IS ENVISAGED THAT THE NEW LEGISLATION SETTING UP A NON-PROFIT-MAKING CLEARING HOUSE ON THE STOCK EXCHANGE WILL BE INTRODUCED IN MID 1989 AND A CENTRAL CLEARING SYSTEM FORMALLY IN PLACE IN MID 1990.
RISK MANAGEMENT ON THE HONG KONG FUTUES EXCHANGE
9.
THE FUTURES EXCHANGE HAS INITIATED ACTION TO STRENGETHEN ITS RISK MANAGEMENT STRUCTURE ALONG THE LINES RECOMMENDED BY THE SRC. ITS CHAIRMAN HAS JUST COMPLETED THE FIRST ROUND OF NEGOTIATION WITH THE BOARD OF DIRECTORS OF ITS CLEARING HOUSE, THE ICCH CHONG KONG), AND WILL SOON START DISCUSSIONS WITH THE SHAREHOLDERS OF THE HONG KONG FUTURES GUARANTEE CORPORATION (HKFGC). IT IS HOPED THAT THE FUTURES EXCHANGE WILL, THROUGH ITS OWN EFFORTS, INTRODUCE A PROPER RISK MANAGEMENT SYSTEM SOON.
RE-CONSTITUTION OF THE HONG KONG FUTURES EXCHANGE
10. THE GOVERNMENT HAD INTRODUCED A TEMPORARY BILL TO THE LEGCO TO EXTEND THE TERMS OF APPOINTMENT OF THE EXISTING BOARD OF THE FUTURES EXCHANGE TO NEXT MARCH, IN ORDER TO ALLOW SUFFICIENT TIME FOR THE EXCHANGE TO VOLUNTARILY REFORM ITS CONSTITUTION AS WELL AS ITS RISK MANAGEMENT STRUCTURE. THIS BILL WAS PASSED IN THE LEGCO ON 13 JULY. SHOULD THE EXCHANGE FAIL TO INTRODUCE THE REFORMS BY ITSELF THE GOVERNMENT IS PREPARED TO ASSIST THROUGH LEGISLATION. IT IS HOPED THAT A MORE BROADLY BASED BOARD WILL BE IN OFFICE TOWARDS THE END
OF THIS YEAR.
THE WAY FORWARD
11.
IN THE NEXT FEW MONTHS, THERE WILL BE CONTINUING NEGOTIATIONS A MONG THE GOVERNMENT AND CONCERNED MARKET BODIES AS WELL AS INTENSIVE LAW DRAFTING WORK TO BRING THE MAJOR PARTS OF THE ABOVE RECOMMENDATIONS INTO EFFECT. IT IS EXPECTED THAT THE BUK OF THE SRC RECOMMENDATIONS WILL BE IMPLEMENTED IN TWO YEARS' TIME.
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