XN000022-1976-08-07 — Page 4

SATURDAY, AUGUST 7, 1976

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ENACTMENT OF THE COMMODITIES TRADING ORDINANCE

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THE COMMODITIES TRADING ORDINANCE WHICH WAS ENACTED ON AUGUST 4 AND PUBLISHED IN YESTERDAY'S GAZETTE, WILL COME INTO OPERATION PART BY PART ON DAYS TO BE APPROVED BY THE GOVERNOR AND ANNOUNCED IN THE GAZETTE.

THE LEGISLATION CONSISTING OF NINE PARTS IS DESIGNED TO PERMIT THE ESTABLISHMENT OF A COMMODITY EXCHANGE IN HONG KONG AS WELL AS TO CONTROL AND REGULATE TRADING IN COMMODITY FUTURES CONTRACT.

PART 1 SETS OUT THE PRELIMINARY MATTERS AMONGST WHICH THE TERM +FUTURES CONTRACT+ IS DEFINED TO REFER TO FUTURES CONTRACTS EXECUTED ON ANY COMMODITY EXCHANGE.

PART II PROVIDES FOR THE ESTABLISHMENT OF A COMMODITIES TRADING COMMISSION AND A COMMISSIONER FOR COMMODITIES TRADING WHO WILL BE THE REGULATORY AUTHORITIES RESPONSIBLE FOR IMPLEMENTING THE PROVISIONS OF THE ORDINANCE. THEIR FUNCTIONS WILL BE ASSUMED BY THE EXISTING SECURITIES COMMISSION AND ITS COMMISSIONER.

PART 11 IS DESIGNED TO PROVIDE A BROAD REGULATORY FRAMEWORK WITHIN WHICH THE COMMODITY EXCHANGE IN HONG KONG WILL OPERATE AND PART IV DEALS WITH THE REGISTRATION OF ALL COMMODITY DEALERS IN COMMODITY FUTURES CONTRACTS, COMMODITY TRADING ADVISERS AND REPRESENTATIVES. AS SOON AS PART IV OF THE ORDINANCE BECOMES OPERATIVE NO PERSON SHALL CARRY ON THE BUSINESS AS A DEALER IN COMMODITY FUTURES CONTRACTS, A COMMODITY TRADING ADVISER OR A REPRESENTATIVE UNLESS HE IS DULY REGISTERED.

PART V OF THE ORDINANCE REQUIRES REGISTERED DEALERS TO KEEP PROPER ACCOUNTS OF THEIR BUSINESSES AND TO SUBMIT ANNUALLY AN AUDITED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT TO THE COMMISSIONER FOR COMMODITIES TRADING WHILE PART VI DEALS WITH TRADING PRACTICES AND, INTER ALIA, PROHIBITS TRADING OF OPTIONS ON THE COMMODITY EXCHANGE.

PART VII DEALS WITH COMMODITIES TRADING COMMISSION DISCIPLINARY COMMITTEE WHICH IS AD-HOC IN NATURE, AND CAN BE APPOINTED BY THE COMMISSION TO INVESTIGATE ANY ALLEGATIONS OF MISCONDUCT BY THE EXCHANGE COMPANY OR ITS ASSOCIATED ORGANISATIONS.

PART VILI REQUIRES THE EXCHANGE COMPANY TO ESTABLISH A COMPENSATION FUND TO MEET CLAIMS OF CLIENTS IN THE EVENT OF DEFAULT OF A MEMBER.

THE LAST PART OF THE ORDINANCE CONSISTS OF MISCELLANEOUS PROVISIONS ONE OF WHICH EMPOWERS THE GOVERNOR IN COUNCIL AFTER CONSULTATION WITH THE COMMISSION TO MAKE REGULATIONS FOR FACILITATING THE IMPLEMENTATION OF THE PROVISIONS OF THE ORDINANCE.

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