ENG-2003 — Page 117

FINANCIAL AND MONETARY AFFAIRS

Following an in-depth review, the committee recommended new provisions be added to the code in 2003 to address the problem of guarantors and third party security providers being held liable for the borrower's additional debts without their consent or knowledge.

On developing financial infrastructure, following implementation of the outbound link from CMU to Euroclear in November 2002 to provide a two-way link, an outbound link from CMU to Clearstream was similarly implemented in January 2003 to provide a two-way link between CMU and Clearstream. These real-time links enable Asian investors to hold and settle Euroclear and Clearstream eligible securities directly via their CMU accounts, thus significantly improving settlement efficiency. At year-end, the Government introduced the Clearing and Settlement Systems Bill into the Legislative Council. The objectives of the proposed legislation are to provide express statutory backing for the oversight role of the Monetary Authority in relation to important clearing and settlement systems in Hong Kong, in line with concerns expressed by the International Monetary Fund; and for the finality of settlements effected through such systems, so as to facilitate the inclusion of the Hong Kong dollar in the Continuous Linked Settlement System which is a global clearing and settlement system for cross-border foreign exchange transactions. Many major international currencies have been admitted to the Continuous Linked Settlement System and it is hoped that the Hong Kong dollar can be admitted in 2004.

Securities and Futures Sector

Main Features

The securities and futures markets in Hong Kong are operated by the SEHK and the HKFE, respectively. Both the SEHK and the HKFE are wholly-owned subsidiaries of the HKEX. At year-end, there were 499 corporate and individual exchange participants on the SEHK and 129 exchange participants on the HKFE.

At year-end, there were 852 companies listed on the Main Board of SEHK with a total market capitalisation of $5,477.7 billion, raising an aggregate of $209.0 billion within the year.

New products continued to be launched in 2003. To meet market demand created by the growth of the H-shares market and to offer an effective trading and hedging instrument for investors in H-shares, the HKEx launched the H-shares Index Futures in December 2003. At about the same time, the H-share Exchange Traded Fund was also listed on the SEHK.

The Hong Kong Securities Clearing Company (HKSCC), a wholly-owned subsidiary of the HKEx, operates the Central Clearing and Settlement System (CCASS) for the clearing and settlement of securities transactions at the SEHK. The CCASS is an automated book-entry system. In addition to brokers and custodians, CCASS services are also available to retail investors.

Securities transactions on the HKEx's securities market are executed by the Third Generation Automatic Order Matching and Execution System (AMS/3) which provides facilities and investor access channels that make securities trading more accessible. The system has maintained 100 per cent uptime record for three consecutive years since its launch in October 2000. The AMS/3 provides an electronic platform for trading of equities, debt securities, exchange traded funds, unit trusts/mutual funds, derivative warrants and equity linked instruments.

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