FINANCIAL AND MONETARY AFFAIRS
Fund Advisory Committee and the Government, the HKMA will proceed with implementation of the recommendation in phases. The HKMA is also monitoring closely the development of e-money, and its impact on real money and seigniorage.
In 2001, the HKMA's CMU reached an agreement with Euroclear, the Brussels- based clearance and settlement system, to develop a direct link between them. This fully-automated real-time link will enable Asian investors to directly hold and settle Euroclear-eligible securities via their CMU accounts, thus significantly improving settlement efficiency.
One of the functions of the HKMA is to promote and encourage high standards of conduct and sound and prudent business practices amongst authorised institutions. This is important to maintain public confidence and trust in the banking system. In 2001, after a comprehensive review, the HKMA revised the Code of Banking Practice. which sets out the minimum standards to be followed by authorised institutions in their dealings with personal customers. The review covered areas such as credit cards, account and loan services, use of debt collection agencies, electronic banking and stored value cards. The revised code was promulgated in November.
Securities and Futures Sector
Main Features
The stock market and the futures market in Hong Kong are operated by the SEHK and the HKFE. Both the SEHK and the HKFE are wholly-owned subsidiaries of the HKEx. At year-end, there were 507 corporate and individual exchange participants trading on the SEHK and 93 exchange participants trading on the HKFE.
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 launched the third generation of the system, AMS/3, in three phases from October 2000. Securities trading has been made more sophisticated with the introduction of new trading facilities and investors access channels, such as market making, new order types, the Multi-workstation System (MWS), the Broker Supplied System (BSS) and the Order Routing System (ORS). Straight-through on-line trading has also become possible. At the end of 2001, all exchange participants were connected to the AMS/3.
The HKEx has also developed a new market structure for Exchange Traded Funds (ETF), which are open-ended mutual funds or unit trusts listed or traded on stock exchanges. The iShares MSCI Taiwan Index Fund and iShares MSCI South Korea Index Fund, two MSCI-based ETFs, commenced trading on the SEHK, under a 'trading only' arrangement on May 2.
At year-end, there were 111 companies listed on the Growth Enterprise Market (GEM) with a total market capitalisation of $61 billion, raising an aggregate of $5.7 billion. Average daily turnover was $162 million.
To improve the operation of the GEM market and its competitiveness, a review on the GEM listing rules was conducted by the SEHK in consultation with the market in June 2000. The proposed amendments, including a minimum active business pursuit period of 24 months for listing applicants and the 12-month moratorium period for initial management shareholders, became effective in October 2001.
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