FINANCIAL AND MONETARY AFFAIRS
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There are no restrictions on the interest rates they may offer. There were 58 restricted licence banks at the end of December 1999 with total deposit liabilities to customers of $34.9 billion at that time.
Restricted licence banks may use the word 'bank' in describing their business in promotional literature and advertisements, but this must be qualified by a description such as 'restricted licence', 'merchant', 'investment' or 'wholesale'. To avoid confusion with licensed banks, descriptions such as 'retail' or 'commercial' are not allowed. Overseas banks seeking authorisation as restricted licence banks may operate in branch or subsidiary form. If in branch form, they may use their registered name even if it includes the word 'bank' or a derivative, but in this case it must be qualified prominently by the words 'restricted licence bank' in immediate conjunction.
Deposit-taking companies are required to have a minimum paid-up capital of $25 million. They are restricted to taking deposits of not less than $100,000, with a term of maturity of at least three months. At the end of December, there were 71 deposit-taking companies, with total deposit liabilities to customers of $5.9 billion. It is generally the HKMA's policy that a person who intends to hold 50 per cent or more of the share capital of an authorised institution incorporated in Hong Kong should be a well-established bank or other supervised financial institution in good standing in the financial community and with appropriate experience.
The Securities and Futures Sector
Only members of the SEHK and the Hong Kong Futures Exchange (HKFE) may trade on these two markets respectively. At year-end, the SEHK had 571 corporate and individual members while the HKFE had 137 members.
Securities transactions on the SEHK are executed by the Automatic Order Matching and Execution System (AMS). To provide the market with a comprehensive trading environment and to further enhance its competitiveness, the SEHK plans to introduce AMS/3 (the third generation of AMS) in the second quarter of 2000. The new system utilitises Internet technology, open interface approaches, data security standards for e-commerce and other advanced technologies. It will also provide a platform for the implementation of straight-through processing in future. In November, the SEHK launched the Growth Enterprise Market (GEM) which offers growth enterprises without a record of profitability an avenue to raise capital for business development. The first listing on the GEM took place on November 25, and at year-end there were seven companies listed with a total market capitalisation of $7,237 million, raising an aggregate of $1,583 million. Average daily turnover was $144 million. Many of those companies listed on the GEM are technologically based companies. At the end of the year, the Stock Exchange had approved 36 firms as sponsors for issuers to be listed on the GEM,
The Stock Exchange is the front-line regulator for the GEM stocks. In regulating the new market, the Exchange particularly emphasised the importance of information disclosure, increased corporate governance and investors being made aware of the higher risks involved in investing in GEM stocks. At present, the trading of the Hang Seng Index (HSI) 33 futures and options contracts which account for over 90 per cent of all the trading volume of the HKFE is conducted in an open outcry environment. In order to become a derivative exchange with all its products trading in an electronic