ENG-1976 — Page 70

FINANCIAL STRUCTURE

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The Governor in Council is empowered to grant a licence to the Exchange Com- pany to operate a commodity exchange in Hong Kong, and the ordinance provides a broad regulatory framework within which the exchange will operate. It also provides for the registration of all commodity dealers in commodity futures contracts, and of commodity trading advisers and their representatives. The Commodities Trading (Dealers, Commodity Trading Advisers and Representatives) Regulations supplement the registration provisions of the ordinance. Registered dealers will be required to keep proper accounts of their businesses and to submit annually an audited balance sheet and profit and loss account to the Commissioner.

The ordinance deals with trading procedures and seeks to prevent improper practices. It also prohibits trading of options on the commodity exchange. A dis- ciplinary committee is to investigate any allegations of misconduct on the part of the Exchange Company or its associated organisations, and also to hear appeals from dealers whom the Commissioner refuses to register. The ordinance requires the Exchange Company to establish a compensation fund to meet claims of clients in the event of default of a member. Among other provisions the Governor in Council, after consultation with the commission, is empowered to make regulations to supplement the provisions of the ordinance.

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