ENG-1981 — Page 82

FINANCIAL SYSTEM AND ECONOMY

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Funds (together with Rules of Practice) was introduced and brought into effect in October.

established to compensate

The combined Stock Exchanges Compensation Fund those who suffer pecuniary loss as a result of defaults by stockbrokers amounted to $25 million on December 31, 1981. No payments were made from this fund during the year. Deposits lodged by dealers other than stockbrokers stood at $9.2 million. The purpose of these deposits is to give some protection to investors against defaulting dealers who are not members of a stock exchange. At the end of 1981, 2 637 people were registered under the Securities (Dealers, Investment Advisers and Representatives) Reg- ulations 1974.

Commodity Exchange

The Hong Kong Commodity Exchange Limited is the only company licensed under the Commodities Trading Ordinance to operate a commodity exchange in futures contracts in Hong Kong. It operates four futures markets: cotton, sugar, soybeans and gold. The turnovers reported on the four markets for 1981 were: cotton market, 15 914 lots of 50 000 lbs each; sugar market, 119 534 lots of 50 long tons each; soybean market, 442 708 lots of 30 000 kg each; gold market 32 740 lots of 100 oz. each. In September the exchange announced that it was, with government approval, establishing a working party to investigate the possible addition of a financial futures market.

At the end of 1981, 1510 people were registered under the Commodities Trading (Dealers, Commodity Trading Advisers and Representatives) Regulations 1976. The Com- modity Exchange Compensation Fund, established to compensate those who suffer pecuni- ary loss as a result of default by shareholders of the exchange, amounted to $7.7 million at the end of the year. Deposits lodged by dealers, other than shareholders of the Hong Kong Commodity Exchange, stood at $700,000. The purpose of the deposits is to give some protection to investors against any default by dealers who are not shareholders of the Hong Kong Commodity Exchange.

Gold Markets

Trading in gold on the Chinese Gold and Silver Exchange Society was active in 1981. Price movements paralleled developments in the other major markets of London, Zurich and New York.

Membership of the Chinese Gold and Silver Exchange Society remained closed at 194 member firms. The price of gold on the society fell from $3,592 per tael of 99 per cent fine gold at the end of 1980, to $2,714 at the end of 1981. One tael is equal to 37.429 grams.

The international gold market in Hong Kong continued to grow during the year. Dealings in this market take place in US dollars per troy once of 99.95 per cent fine gold, with delivery in London. The price of gold loco London fell from US$588 per ounce at the end of 1980 to US$400 per ounce at the end of 1981.

Exchange Fund

The Hong Kong Government Exchange Fund is effectively the banker to the government, and so carries out a number of quasi-central banking functions. The Exchange Fund was established by the Currency Ordinance of 1935 (later renamed the Exchange Fund Ordinance), with its stated purpose being to regulate the exchange value of the Hong Kong dollar. The fund is managed by the Monetary Affairs Branch of the Government Secretariat under the directions of the Financial Secretary.