ENG-2006 — Page 119

Financial and Monetary Affairs | 91

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The HKMA has taken steps to implement the recommendations arising from a comprehensive review of Hong Kong's financial infrastructure conducted in 2005. The objective is to build a safe and efficient financial infrastructure based on a multi- currency, multi-dimensional platform, and to develop Hong Kong into a payment and settlement centre in the region.

Major projects completed in 2006 include:

⚫ the CMU Bond Price Bulletin;

• the Renminbi Settlement System;

• a link between the Ringgit RTGS system in Malaysia and the US dollar RTGS system in Hong Kong;

• bulk settlement for credit card transactions; and

• system enhancement tools including RTGS Liquidity Optimiser.

The HKMA has established a comprehensive marketing programme to explore opportunities to link the various RTGS systems and the CMU with similar systems in the region, and to promote the use of the clearing and settlement systems in Hong Kong.

Development of the Bond Market

The Government has boosted the development of the bond market in recent years by providing the necessary financial infrastructure, simplifying the issuance process, removing regulatory impediments, offering tax incentives and encouraging public corporations to issue bonds. Investor education on bond investment has also been strengthened.

The HKMA completed a review of the EFBN programme in 2006 and will gradually implement the recommendations of the review. These include refining the market-making system for EFBNs by providing incentives to encourage market makers to trade EFBNs more actively; extending the benchmark Exchange Fund Note (EFN) yield curve to beyond 10 years; streamlining the issuance programme by making greater use of re-opening existing EFN issues; and introducing an electronic trading platform. The first set of league tables, ranking market makers according to their turnover in Exchange Fund Bills (EFBs) and EFNs, was released in December. This will help provide recognition for top-performing market makers.

The review also recommended the removal of the 'three-year rule' to help develop the domestic bond market. The 'three-year rule', which was imposed in 1998, requested nine Multilateral Development Banks (MDBs) to confine their issuance of Hong Kong dollar-denominated bonds to tenors of three years or longer. The request was withdrawn on October 9.

In 2006, the Hong Kong dollar debt market grew further, with the total outstanding amount rising to $748 billion at year-end, a 13 per cent increase from a