XN000022-1990-06-15 — Page 4

FRIDAY, JUNE 15, 1990

3

WAS

OTHER REASONS INCLUDED MISPLACED FEARS THAT THE GOVERNMENT INTENT ON MODELLING MARKET SUPERVISION TOO CLOSELY ON THAT APPLIED IN THE UNITED KINGDOM; EROSION OF THE ROLE AND PROFITABILITY OF THE SMALLER BROKERS; AND THE CUMULATIVE IMPACT OF INTRODUCING MANY REFORMS WITHIN A SHORT PERIOD OF TIME.

HE ADDED THAT THE GOVERNMENT, IN ALLAYING CONCERN ABOUT OVER-REGULATION, HAD BEEN ENCOURAGING THE SECURITIES AND FUTURES COMMISSION (SFC) AND THE EXCHANGES TO BUILD BRIDGES AND DEVELOP MUTUAL TRUST.

MR NENDICK TOLD PARTICIPANTS IN THE SEMINAR ON THE FINANCIAL SECTOR LIBERALISATION AND REGULATION THAT THE SECURITIES REVIEW COMMITTEE (

(SRC), WHICH DELIVERED ITS REPORT IN JUNE 1988, FOUND THAT THE CONCEPT OF SELF-REGULATION AND MARKET SELF-DISCIPLINE HAD FAILED TO DEVELOP IN HONG KONG.

THE SUPERVISORY BODIES THEN CHARGED WITH OVERSEEING MARKETS HAD LOST EFFECTIVE CONTROL, HE SAID.

THE

FURTHERMORE, THE SETTLEMENT SYSTEM HAD PROVED INADEQUATE TO COPE WITH THE VERY HIGH LEVELS OF TURNOVER EXPERIENCED, HE SAID.

THE SRC RECOMMENDED A SERIES OF CHANGES WHICH INCLUDED CONSTITUTIONAL REFORM OF THE STOCK AND FUTURES EXCHANGES TO ENSURE BROAD CROSS-SECTION OF REPRESENTATION ON THE GOVERNING BODIES; THE DEVELOPMENT OF INDEPENDENT AND PROFESSIONAL STAFF TO ADMINISTER THE EXCHANGES; EXTENSION OF T+1 SECURITIES SETTLEMENT PERIOD то T+3 AND EARLY IMPLEMENTATION OF A CENTRAL CLEARING SYSTEM.

THE COMMITTEE ADVOCATED ALSO STRENGTHENING OF RISK MANAGEMENT ON THE FUTURES EXCHANGE AND REPLACING THE REGULATORY BODIES WITH A SINGLE INDEPENDENT STATUTORY BODY OUTSIDE THE CIVIL SERVICE TO BE HEADED AND STAFFED BY FULL-TIME REGULATORS, MR NENDICK SAID.

THE SRC REPORT WAS WELL-RECEIVED BY LOCAL AND OVERSEAS FINANCIAL SECTORS AND THE GOVERNMENT ACCEPTED THE GENERAL THURST OF ITS RECOMMENDATIONS AND COMMITTED ITSELF ΤΟ THEIR

IMPLEMENTATION, HE NOTED.

EARLY

TO REFORM

MR NENDICK ADDED THAT THE GOVERNMENT WAS DETERMINED THE REGULATORY SYSTEM FOR THE SECURITIES INDUSTRY TO BRING HONG KONG IN LINE WITH THE REGULATORY STANDARDS OF INTERNATIONAL CENTRES.

THE ULTIMATE AIM OF THESE REFORMS WAS ΤΟ DEVELOP INTO A PRE-EMINENT CAPITAL MARKET IN THE SOUTH EAST ASIAN NENDICK STRESSED.

HE NOTED THAT MAJOR REFORMS WERE ALL IMPLEMENTED MONTHS OF THE CRASH IN OCTOBER 1987.

FINANCIAL

HONG KONG REGION, MR

WITHIN 20

REVIEWING THE SECURITIES MARKETS TODAY, MR NENDICK SAID THAT THE STOCK EXCHANGE, ON ITS OWN INITIATIVE, HAD SUCCESSFULLY RECONSTITUTED ITSELF BY JULY 1988 AND A COUNCIL WITH A BROADLY-BASED MEMBERSHIP AND REPRESENTATIVE OF THE MARKET AND AN INDEPENDENT CHAIRMAN WAS ELECTED IN OCTOBER 1988.

/THE DAY-TO-DAY