XN000022-1987-11-11 — Page 8

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WEDNESDAY, NOVEMBER 11, 1987

FS: DISASTROUS TO ALLOW FUTURES MARKET TO COLLAPSE

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THE FINANCIAL SECRETARY, THE HON PIERS JACOBS, SAID IN THE LEGISLATIVE COUNCIL TODAY (WEDNESDAY) THAT HE DID NOT WELCOME THE SUSPENSION OF TRADING IN ANY MARKET, BUT THERE WERE CIRCUMSTANCES IN WHICH SUSPENSION OF TRADING WAS UNAVOIDABLE.

AND

REFERRING TO RECENT EVENTS CONCERNING THE STOCK MARKET FUTURES MARKET IN HONG KONG, MR JACOBS SAID THAT HONG KONG WAS NOT ALONE IN EXPERIENCING WHAT HAD HAPPENED ON THE MARKETS IN THE PAST THREE WEEKS. ALL FINANCIAL CENTRES HAD BEEN HIT ΤΟ A GREATER OR LESSER DEGREE BY THE RECENT WORLDWIDE COLLAPSE IN EQUITY MARKETS.

TO

ON THE POWER OF THE GENERAL COMMITTEE OF THE UNIFIED EXCHANGE TO SUSPEND TRADING, MR JACOBS SAID IT WAS NOT FOR THE GOVERNMENT COMMENT ON THE LEGALITY OF ACTIONS BY A PRIVATE INDIVIDUAL, OR COMPANY, PARTICULARLY WHEN THOSE ACTIONS MIGHT BE THE SUBJECT OF DISPUTE.

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I UNDERSTAND, HOWEVER, THAT THE EXCHANGE HAD TAKEN LEGAL ADVICE ON THE LEGALITY OF ITS ACTION.

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COMMENTING ON A SUGGESTION THAT URGENT LEGISLATION SHOULD HAVE BEEN PASSED TO ENABLE THE GOVERNMENT TO ORDER THE STOCK MARKET ΤΟ REOPEN, MR JACOBS SAID EVEN HAD THIS BEEN DONE, THE RESCUE PACKAGE WOULD STILL HAVE HAD TO FORM PART OF IT.

"AND IT IS MOST UNLIKELY THAT THE BEFORE THE MONDAY IN ANY EVENT, HE SAID.

"

MARKETS WOULD HAVE OPENED

MR JACOBS SAID: "OUR MAIN OBJECTIVE AFTER THE MARKETS CLOSED WAS TO ENSURE THAT THEY REOPENED AS QUICKLY AS POSSIBLE AND IN AS NORMAL A MANNER AS POSSIBLE. THIS IS IN ACCORDANCE WITH OUR PRIME POLICY OBJECTIVE, WHICH IS ΤΟ MAINTAIN THE INTEGRITY OF OUR SECURITIES MARKETS.

"CLEARLY THE MOST IMPORTANT

INGREDIENT OF MARKET

INTEGRITY IS

CAN CONTINUE

THE SURVIVAL OF THE MARKET ITSELF, SO THAT PARTICIPANTS TO TRADE NORMALLY.

"IT WOULD HAVE BEEN DISASTROUS, IN MY VIEW, IF WE HAD MERELY ALLOWED THE FUTURES MARKET TO COLLAPSE. THAT WOULD HAVE DONE NOTHING TO SAFEGUARD THE INTERESTS OF INVESTORS IN FUTURES AND WOULD HAVE DONE IMMENSE HARM TO THE REPUTATION OF HONG KONG AS A FINANCIAL CENTRE.

HE SAID THAT THE GOVERNMENT HAD CONSIDERED THE POSSIBLE CONSEQUENCES OF ALLOWING THE FUTURES EXCHANGE, THE HONG KONG FUTURES GUARANTEE CORPORATION, AND MARKET PARTICIPANTS IN THE HANG SENG FUTURES MARKET TO FIND A SOLUTION BY THEMSELVES,

INDEX

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