ENG-2009 — Page 122

74 Financial and Monetary Affairs

• Phase I of SWIFTNet migration5;

• Extension of operation of foreign-currency RTGS systems and the CMU to include all Hong Kong general holidays except January 1; and

• Establishment of multi-currency cross-border payment arrangements between the Mainland and Hong Kong.

A working group comprising representatives of the SFC, HKEX and the Federation of Share Registrars Limited, issued a joint consultation paper in December 2009 seeking public views on a proposed operational model for implementing a scripless securities market in Hong Kong. To underline its support for this initiative. and to lay the foundation for the setting up of a scripless securities market in Hong Kong, the Government has proposed, as a first step, technical amendments to the Companies Ordinance to remove legal obstructions to scripless securities holding and trading. This would help the market better concentrate on the discussions on the proposed operational model for implementing a scripless securities market.

Development of the Bond Market

The Government has boosted development of the bond market in recent years. by providing it with the necessary financial infrastructure, simplifying the issuance process, optimising regulatory arrangements, offering tax incentives, encouraging public corporations to issue bonds and strengthening education for bond investors.

To promote development of the local bond market, the Government obtained the Legislative Council's approval in July 2009 to implement the Government Bond Programme (GBP), under which the Government is authorised to issue bonds with an aggregate outstanding principal of up to HK$100 billion and to set up the Bond Fund to manage the sums raised under the GBP. The Bond Fund is not treated as part of the fiscal reserves and is managed separately from other Government accounts. It is used to repay principal, meet the financial obligations and liabilities associated with the GBP and make investments.

The GBP comprises the institutional bond issuance and the retail bond issuance programmes. In 2009, two tranches of Government bonds for institutional investors were issued, attracting a diverse group of investors.

With ample liquidity in the interbank market, banks' demand for short-dated Exchange Fund papers for liquidity management increased substantially. In response to strong demand, the HKMA issued an additional HK$374.4 billion worth of Exchange Fund Bills in 2009. It also continued fine-tuning the maturity mix of EFBNs with increased issuance of 5-, 10- and 15-year Exchange Fund Notes.

Outstanding Hong Kong dollar debts, including EFBNs, exceeded HK$1,111 billion at the end of 2009. During the year, HK$1,048 billion worth of EFBNs and HK$194 billion worth of other Hong Kong dollar debts notes were issued.

5

It replaces the closed, proprietary platform of Hong Kong's RTGS systems and the CMU with an open platform using Internet technology.