TNAG-1764-FCO40-2518-Hong-Kong-stock-market-and-exchange-rate-1988 — Page 48

THE FUTURES EXCHANGE

FUTURE AND MANAGEMENT

Chapter Six of the Report)

The SRC recommends that

1.

2.

3.

4.

5.

the HSI contract should not be dropped on regulatory grounds provided that sufficient safeguards and risk. management controls are in place to prevent a recurrence of October 1987. (para. 6.52)

the Exchange should review the Hang Seng index futures contract. (para. 6.53)

the introduction of a new contract should depend

on :

(a)

(b)

(c)

(d)

the Exchange being satisfied that all the clearing members for the new contract are robust and the new market will be adequately tiered;

a members' fund being established to support the risks of clearing the new contract;

the Exchange taking de-facto control of the risk management aspect of the clearing function. for the new contract, with the clearing house answerable to the Exchange's senior management on a day-to-day basis; and

the regulatory authority being satisfied that adequate safeguards for the new contract concerned are in place.

(para. 6.58)

the Exchange's Articles of Association should be amended to remove all dividend provisions and to state in express terms that it is a non-profit-making company. (para. 6.62)

the Articles of Assocation of the HKFE should be amended to require that the Board be broadly based and representative of the market, users of the market and the public interest and that the Board should incorporate :-

(a) eight full or market members elected from the

membership of the Exchange;

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