XN000022-1995-01-18 — Page 48

(b)

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it will consider allowing investors to open accounts directly with the clearing house; if so, whether there will be any government department responsible for handling complaints lodged by investors who have suffered losses; if not, what the reasons are?

Answer:

(a)

(b)

The Government is aware of the organisational structure of the Hong Kong Securities Clearing Company Ltd (Clearing Company). It is a non-profit distributing company, incorporated for the purpose of establishing and operating a centralised securities clearing and settlement system for Hong Kong. The primary function of the Clearing Company is to provide services for the clearing and settlement of transactions in securities admitted into the Central Clearing and Settlement System (CCASS) and effected on the Stock Exchange of Hong Kong Ltd. (the Stock Exchange).

The Clearing Company is a company limited by guarantee of HK$50 million and has six members: the Stock Exchange, Bank of China, Hang Seng Bank Ltd, Standard Chartered Bank, The Bank of East Asia Ltd and The Hongkong and Shanghai Banking Corporation Ltd. The Stock Exchange provides 50% of the guarantee and each of the member banks provides 10%.

It is governed by a Board of Directors comprising 10 Stock Exchange appointees, an appointee from cach of the five member banks, five directors appointed by the Financial Secretary to represent the public interest, and the Chief Executives of the Stock Exchange and the Clearing Company.

The Clearing Company was designed to provide "wholesale" automated clearing and settlement services to financial intermediaries, such as stockbrokers and banks. Investors are not able directly to participate in CCASS. They must use financial intermediaries, such as stockbrokers and custodians, to access Clearing Company services.

The question of allowing investors to open accounts directly with CCASS is one which would continue to be reviewed by the Clearing Company and the Securities and Futures Commission (SFC). The matter requires considerable thought and analysis. The following issues, among others, would need to be addressed.