ENG-1985 — Page 60

THE ECONOMY

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was brought into operation in February 1981. Under this ordinance, the Stock Exchange of Hong Kong Limited will have the exclusive right to operate a stock market in Hong Kong from a date to be appointed by the Financial Secretary. The unification of the existing exchanges is expected to bring better overall management and to provide for more effective regulation. The Stock Exchange of Hong Kong Limited is expected to commence trading in 1986. At the end of 1985, the new stock exchange had 924 members.

The Commissioner for Securities continues to provide prudential supervision of the securities industry in Hong Kong by enforcing the Securities Ordinance, the Protection of Investors Ordinance and the Stock Exchanges Unification Ordinance. The Securities Ordinance provides for a regulatory framework within which the stock exchanges operate. It offers protection to investors in securities by requiring registration of dealers, dealing partnerships, investment advisers, investment advisers' partnerships and representatives and regulating trading practices in securities. It also provides for the investigation of malpractices and for the establishment of a Stock Exchanges Compensation Fund to com- pensate clients of defaulting stockbrokers. The Protection of Investors Ordinance aims at protecting investors by prohibiting the use of fraudulent or reckless means to induce investors to buy or sell securities or to take part in investment arrangements, and regulates the issues of related publications.

During the year, and in order to meet changing circumstances, amendments were made to the Stock Exchanges Unification Ordinance. The amendments permit corporations to become members of the Stock Exchange of Hong Kong Limited and remove the dis- qualifications from membership of that exchange of practising solicitors and accountants, directors or employees of banks and deposit-taking companies licensed or registered under the Banking and the Deposit-taking Companies Ordinances. In addition, they also provide for members to trade in partnership with other members or non-members of the exchange. Amendments were also introduced to the Securities Ordinance to bring in financial requirements comprising a minimum net worth requirement and liquidity margin require- ment for compliance by registered dealers. The Securities (Stock Exchange Listing) Rules 1986, which require the disclosure of shareholdings and company information, were to be considered by the Executive Council in January 1986.

The Commissioner for Commodities Trading, who is also the Commissioner for Securities, continues to provide prudential supervision of the commodity futures industry in Hong Kong by enforcing the Commodities Trading Ordinance. The Hong Kong Commodity Exchange Limited, which was established in 1977 and licensed under this ordinance as the sole company permitted to operate an exchange trading in futures contracts, was reorganised and renamed as the Hong Kong Futures Exchange Limited in 1985. The exchange now has four markets offering contracts in cotton (though no trading in cotton has taken place in recent years), sugar, soyabeans and gold. The exchange is preparing for trading in Stock Index Futures contracts in early 1986.

The Chinese Gold and Silver Exchange Society operates a gold bullion market which is one of the largest in the world. Gold traded on the society is of 99 per cent fineness, measured in taels and quoted in Hong Kong dollars. Prices, after allowing for exchange rate fluctuations, follow closely those in the other major markets of London, Zurich and New York. Membership of the society remained closed at 193 member firms. There is another gold market in Hong Kong, the main participants in which are major international gold trading companies. Trading in this market, which is commonly known as the loco-London gold market, has been growing in recent years. Dealings principally take place in US dollars per troy ounce of 99.95 per cent fine gold, with delivery in London.

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