ENG-2005 — Page 108

78 | Financial and Monetary Affairs

Securities and Futures Sector

Main Features

The securities market in Hong Kong is operated by the SEHK and futures market, the Hong Kong Futures Exchange Limited (HKFE), both being wholly owned subsidiaries of the Hong Kong Exchanges and Clearing Limited (HKEX). At year-end, there were 468 exchange participants on the SEHK and 137 exchange participants on the HKFE.

By the end of 2005, there were 1 135 companies listed on the main board and the Growth Enterprises Market (GEM) of the SEHK with a total market capitalisation of about $8,180 billion, raising an aggregate of $301 billion within the year.

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New products continued to be launched during the year. The FTSE/Xinhua China 25 Index Futures and Options were introduced in May 2005. Two exchange-traded funds (ETFs) under the Asian Bond Fund 2 (ABF2) the ABF Hong Kong Bond Index Fund and the ABF Pan Asia Bond Index Fund were listed on SEHK in June and July respectively. Six additional classes of stock options and futures based on individual stocks were launched during the year. In addition, the first REIT, the Link REIT, was listed on the SEHK in November, followed by two other REITs. Meanwhile, the SFC approved HKEx's proposal to introduce callable bull/bear contracts in late 2005. HKEX is preparing for their launch in 2006.

The SEHK operates the Third Generation Automatic Order Matching and Execution System (AMS/3) for securities trading. AMS/3 provides an electronic platform for trading equities, debt securities, exchange-traded funds, unit trusts/mutual funds, derivative warrants and equity linked instruments. It also provides facilities and investor access channels that make securities trading more accessible. The system has maintained a 100 per cent uptime record for five consecutive years since its launch in October 2000.

The Hong Kong Securities Clearing Company Limited (HKSCC), a wholly owned subsidiary of the HKEX, operates the third generation of the Central Clearing and Settlement System (CCASS/3) for clearing and settlement of securities transactions concluded at the SEHK. The CCASS/3 is an automated book-entry system that operates on an open architecture. In addition to brokers and custodians, certain CCASS services are also available to retail investors. For example, investors may open Investor Participant Accounts with the clearing company to keep their securities in CCASS. The CCASS/3 network is connected to FinNet, which is built to provide a single connection to access major financial services in Hong Kong and improve straight-through processing of financial transactions.

The HKFE operates the Hong Kong Futures Automated Trading System for the trading of futures and options contracts and the Derivatives Clearing and Settlement System (DCASS) for the clearing and settlement of such contracts. DCASS shares the same common database and system infrastructure as the trading system. The implementation of DCASS has not only harmonised clearing arrangements for the derivatives market, but also improved the operational efficiency from trading to settlement.