TNAG-1764-FCO40-2518-Hong-Kong-stock-market-and-exchange-rate-1988 — Page 22

8.

9.

10.

11.

12.

13.

14.

the HKFE and the clearing house should review the case for introducing a regular intra-day settlement if volumes and open positions build up again. (para. 8.40)

brokers should be obliged to collect a "good faith" deposit from all new customers before they execute trades on their behalf. (para. 8.44)

the HKFE should review its risk-based capital requirements in the light of debates elesewhere and the nature of the Hong Kong market.

(para. 8.49)

the HKFE and its clearing house should set limits on gross open positions on either side of the market in relation to net worth, not on net open positions relative to net worth. (para. 8.52)

the size of the clearing members' fund should not be designed to cover a catastrophe

e.g. a 50% default and a 30% fall; but should be set in the light of the overall risks in the market but not by a rigid formula; and members' contributions should depend on the amount of risk they are creating, subject to a minimum level. (para. 8.59)

large traders should be identified by name. (para. 8.67)

the HKFE and the CH should inter alia :-

(a)

(b)

(0)

(d)

(e)

recompute the capital position of firms each day on the basis of the monthly capital return and the daily pays and collects;

compare the daily pays and collects of each firm against the firm's capital and the recent pattern of pays and collects;

compare open positions and volumes with the recent trends, watching for a rapid build up;

approach a firm to find out what is happen- ing if any items are significant or unusual; and

in fast markets, estimate the impact of various price changes on firms and also on customers with reported large position.

(para. 8.68)

SO'd

15

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