CONFIDENTIAL HKC 7001
For information
(8.11.88)
XCCI(88)81 Copy No
NOTE FOR EXECUTIVE COUNCIL
•
THE SECURITIES REVIEW COMMITTEE REPORT -
PAPER NO. 5
RECONSTITUTION OF
HONG KONG FUTURES EXCHANGE LIMITED
INTRODUCTION
23
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15/11
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this
The
Members are asked to note the contents of paper, which
which has
has been prepared for their information. memorandum explains the latest proposals for revising the Memorandum and Articles of Association (Memarts) and Rules of the Hong Kong Futures Exchange Limited (HKFE),
(HKFE), which were approved in principle by the Commodities Trading Commission (CTC) on 26 October 1988. Such approval is necessary pursuant to section 14 of the Commodities Trading Ordinance.
BACKGROUND AND ARGUMENT
2
The Securities Review Committee (SRC), in its report published in June this year, criticized the tripartite structure of futures market, in that the clearing house for futures contracts (ICCH (Hong Kong) Limited) and the body guaranteeing futures contracts (Hong Kong Futures Guarantee Corporation Limited) are separately constituted to HKFE itself, saying that this led to "confusing lines of responsibility, and effectively obstructed the development of an adequate risk management system, which is essential to any futures market". It recommended, inter alia,
(a)
a fundamental reconstitution of HKFE, in particular its governing board of directors,
(b) the incorporation of the clearing house as a
wholly-owned subsidiary of HKFE,
(c)
а clear delineation of responsibility among HKFE, the clearing house,
house, and the guarantee corporation, and
(d)
the
strengthening of the
structure.
risk-management
3
As an initial step in implementing a comprehensive reform package and in improving the management and functional efficiency of HKFE along the lines of the SRC recommendations, the current Board of HKFE
of HKFE has proposed
a
CONFIDENTIAL
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