ENG-1999 — Page 103

FINANCIAL AND MONETARY AFFAIRS

environment, the HKFE has devoted considerable efforts and resources to upgrading the HKATS (Automated Trading System). It plans to migrate the trading of the HSI33 futures and options contracts from the open outcry system to the HKATS in the first half of 2000.

The Hong Kong Securities Clearing Company (HKSCC) operates the Central Clearing and Settlement System (CCASS) for securities trading at the SEHK. CCASS is one of the most important reforms to the risk management system introduced after the 1987 market crash. It is an automated book-entry system that handles the settlement of securities. In addition to brokers and custodians, CCASS services are also available to retail investors. In 1999, the HKSCC expanded its systems to cover a wider range of financial instruments including the Exchange Fund Notes (EFN) and Hong Kong Mortgage Corporation (HKMC) Notes. Making such notes accessible to retail investors is conducive to the development of Hong Kong's bond market.

Regulation of the Financial Sector

The Government has consistently worked towards providing a

providing a favourable environment in the financial sector, with adequate regulation to ensure sound business standards and confidence in the institutional framework, but without unnecessary impediments of a bureaucratic or fiscal nature.

The Hong Kong Monetary Authority (HKMA)

The HKMA was established in April 1993 by merging the Office of the Exchange Fund with the Office of the Commissioner of Banking. The Exchange Fund (Amendment) Ordinance 1992 provided for the establishment of the HKMA.

The HKMA's policy objectives are to maintain currency stability, within the framework of the Linked Exchange Rate System, through sound management of the Exchange Fund, monetary policy operations and other means deemed necessary; to ensure the safety and stability of the banking system through the regulation of banking business and the business of taking deposits, and the supervision of authorised institutions; and to promote the efficiency, integrity and development of the financial system, particularly payment and settlement arrangements.

The HKMA is an integral part of the Hong Kong Special Administrative Region (HKSAR) Government, but can employ staff on terms different from those of the Civil Service to attract personnel of the appropriate experience and expertise. Its staff and operating costs are charged directly to the Exchange Fund instead of the general

revenue.

The HKMA is accountable to the Financial Secretary, who is advised by the Exchange Fund Advisory Committee (EFAC) on matters relating to the control of the Exchange Fund. The committee functions as a management board, meets monthly and advises the Financial Secretary on, among other things, the HKMA's annual budget.

The HKMA is organised into six departments, namely Banking Supervision Department, Banking Policy Department, External Department, Reserves Management Department, Monetary Policy and Markets Department, Research Department, as well as a Legal Office.

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