ENG-2004 — Page 113

Financial and Monetary Affairs 1 83

two-factor authentication for high-risk retail Internet banking transactions by June 2005 to further strengthen Internet banking security. So far the number of customers who have fallen victim to these phishing scams and suffered financial losses has not been significant in Hong Kong. The HKMA will continue to work with the banking industry and the Hong Kong Police Force to promote awareness of Internet banking fraud through a multi-channel consumer education programme, including educational leaflets, a series of TV episodes and radio segments, and an interactive computer programme on Internet banking security.

One of the functions of the HKMA is to promote and encourage high standards of conduct and sound and prudent business practices among Als, primarily by way of the Code of Banking Practice. The code is issued by the industry associations and endorsed by the HKMA. It sets out the minimum standards to be followed by Als in their dealings with personal customers. In 2002, the industry established the Code of Banking Practice Committee, in which the HKMA is represented, to provide guidance on the interpretation of the code and to undertake future reviews from time to time.

On developing financial infrastructure, an

financial infrastructure, an inbound link from the China Government Securities Depository Trust & Clearing Co Ltd (CDC) to CMU was established in April 2004 to foster cross-border debt securities settlement between Mainland China and Hong Kong. This is a one-way link facilitating CDC Members (including banks, trust companies and other financial institutions in the Mainland) that are authorised to invest in foreign debt securities to settle and hold Hong Kong and foreign debt securities through the CDC's account with the CMU.

In November 2004, the Clearing and Settlement Systems Ordinance (CSSO) became effective. Under the CSSO, the Monetary Authority is empowered to designate and oversee clearing and settlement systems that are material to the monetary or financial stability of Hong Kong or to the functioning of Hong Kong as an international financial centre. The ordinance also provides statutory backing to the finality of settlement for transactions made through systems designated under the ordinance by protecting the settlement finality from insolvency laws or any other laws. To this end, the Monetary Authority issues certificates of finality to designated systems that meet criteria specified in the ordinance. By the end of 2004, five clearing and settlement systems, including the CMU and Hong Kong dollar Clearing House Automated Transfer System (CHATS), CLS System, US dollar CHATS and euro CHATS, have been designated, and each was issued a certificate of finality.

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 HKEX. At year-end, there were 490 exchange participants on the SEHK and 126 exchange participants on the HKFE.