FINANCIAL AND MONETARY AFFAIRS
protection for investors of these funds within the framework of the Protection of Investors Ordinance.
The SFC has been encouraging the development of more efficient equity trading systems and a greater variety of securities and futures products. It has been working closely with the Hong Kong Securities Clearing Company in order to implement the proposed new automated book-entry central clearing and settlement system, which began clearing stock market transactions on a continuous net settlement basis in October 1992. The new clearing and settlement system is a major achievement for the Hong Kong market, allowing the development of an automated transaction and execution system (which is well underway), while at the same time improving settlement efficiency, enhancing risk management capability, and increasing trading capacity. In the first six months of 1992, capacity problems caused by the sharp increases in transaction volume on the Stock Exchange of Hong Kong highlighted the absolute necessity of a more modern system for clearing and settling trades, as well as the necessity for an automated trading system.
The SFC and the Stock Exchange have taken steps to develop the necessary systems for introducing short-selling and stock borrowing and lending, and are working towards the development of new financial products such as traded options. The Stock Exchange is also examining the viability of listing PRC-based companies in Hong Kong, while maintaining adequate standards of investor protection. The SFC is also working on a rationalisation and updating of Hong Kong's legislative framework for securities and futures regulations into a coherent, well-organised and user-friendly body of securities law.
Hong Kong as an International Financial Centre
The favourable geographical position of Hong Kong, which provides a bridge in the time gap between North America and Europe, together with strong links with China and other economies in the South-East Asian region as well as excellent communications with the rest of the world, have helped Hong Kong to develop into an important international financial centre. The absence of any restrictions on capital flows in and out the territory has also contributed to this.
Foreign banks in Hong Kong tend to be the premier banks in their countries of incorporation and this is illustrated by the fact that 79 of the top 100 banks in the world in 1992 have operations in the territory. In addition, many merchant banks or investment banks of world standing operate in Hong Kong. A substantial proportion of the transactions in the banking sector are international in nature: more than 60 per cent of the sector's aggregate assets and liabilities are external, spreading over more than 100 countries. The financial markets, particularly in foreign exchange and gold, form an integral part of the corresponding global markets. Moreover, Hong Kong serves as an important centre for the intermediation of international flows of savings and investment, particularly through the syndication of loans and international fund management. International investors play a significant and increasing role in Hong Kong, and Hong Kong investment overseas is also believed to be considerable.
The Financial Scene
A mutual agreement was announced on February 19, 1992 by the Provisional Liquidator of the Bank of Credit and Commerce Hong Kong Ltd. (BCCHK) and the Hong Kong
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