36
FINANCIAL STRUCTURE
The combined Stock Exchanges Compensation Fund - established to compensate those who suffer financial loss as a result of defaults by stockbrokers - amounted to $24.7 million at December 31, 1977. (Up to the end of 1977, no payments had been made from this fund.) Deposits lodged by dealers other than stockbrokers stood at $5.8 million. The purpose of the latter deposits is to give limited protection to investors against a defaulting dealer who is not a member of a stock exchange. Unlike the Compensation Fund, however, the dealers' deposits are not pooled. Both funds showed a surplus in the fiscal year to March 31, 1977. Some $2.3 million was subse- quently distributed proportionately to the four stock exchanges in respect of the surplus on the Compensation Fund, and some $555,000 was paid out to depositors in respect of the surplus on the Dealers' Deposit Fund.
At the end of 1977, 2,110 people were registered under the Securities (Dealers, Investment Advisers and Representatives) Regulations 1974. They included: 91 cor- porate dealers; 1,013 individual dealers, including 923 stockbrokers on the four stock exchanges; 47 corporate investment advisers; 81 individual investment advisers; 816 dealers' representatives; and 62 investment representatives. During the year, 20 corporations were declared exempt dealers and seven corporations were declared exempt investment advisers.
The turnovers for 1977 reported on the four exchanges were: Far East Exchange, $2,898.79 million; Hong Kong Stock Exchange, $1,621.08 million; Kam Ngan Stock Exchange, $1,575.40 million; and Kowloon Stock Exchange, $31.48 million. The total of $6,126.75 million is a decrease of 53.43 per cent on the previous year's figure.
Commodities Trading
Hong Kong advanced a step further in stature as a financial centre when the Hong Kong Commodity Exchange began business on May 9, 1977. The Hong Kong Com- modity Exchange Ltd. is the only company granted a licence to operate a commodity exchange in Hong Kong since the enactment of the Commodity Exchanges (Prohibi- tion) Ordinance in 1973. The contracts executed on the commodity exchange are cleared by the International Commodities Clearing House (HK) Ltd. One of the unique features of the commodity exchange is that it has procured the establishment of a guarantee corporation to guarantee the fulfilment of futures contracts in the event of default by either of the two parties to such contracts. Membership of the exchange is of two types - full membership and trade affiliated membership.
The first market operated by the commodity exchange trades in American or American-type raw cotton of any original of middling grade and 2.54-centimetre staple length. The second market, which began business in November, trades in sugar. The Commodities Trading Ordinance, Cap. 250, enacted to supervise the activities of the commodity exchange and to regulate the trading in commodity futures contracts in Hong Kong, has been brought into force with the exception of Section 50, which requires dealers to lodge annual accounts. Under Part II of the ordinance, the Com- modities Trading Commission
has been a supervisory body of seven people established. The Commissioner for Securities also has been appointed the Commis- sioner for Commodities Trading. At the end of 1977, 486 people were registered under the Commodities Trading (Dealers, Commodity Trading Advisers and Representa- tives) Regulations 1976. They included 117 commodity dealers (40 corporate dealers
J
-