ENG-2010 — Page 127

Financial and Monetary Affairs 85

In the derivatives market, there were some new records. Turnovers of Hang Seng Index options and H-shares Index options were 8 515 049 and 2 910 713 contracts respectively, the highest ever. Turnover of Mini H-shares Index futures and Mini-Hang Seng Index options also set record highs in 2010. There was also record high open interest for H-shares Index futures, Mini H-shares Index futures, Hang Seng Index options and Mini Hang Seng Index options.

In the futures market, around 116 million futures and options contracts were traded in 2010, 18 per cent higher than in 2009. The Hang Seng Index futures and the H-shares Index futures recorded a turnover of 21 031 085 contracts and 12 429 800 contracts respectively, rising 1.5 per cent and 0.3 per cent from 2009. At year-end 2010, there were 16 automated trading services providers, comprising mainly foreign exchanges and regulated entities, authorised by the SFC to provide automated trading services in Hong Kong. Automated trading services are services provided by means of electronic facilities, not being facilities provided by a recognised exchange company or a recognised clearing house, to transact or settle transactions in securities or futures contracts.

Securities and Futures Commission

The SFC was established in May 1989 following the enactment of the Securities and Futures Commission Ordinance, which was replaced by the SFO that came into effect on April 1, 2003. Established as an autonomous statutory body, the SFC is responsible for regulating the securities and futures markets in Hong Kong.

The SFC is funded by the market. No government funding has been sought since 1993. Its total expenditure in 2010-11 is estimated to be $881 million.

The exercise of powers by the SFC is subject to a range of checks and balances. For instance, a wide range of SFC decisions is subject to appeal at the independent Securities and Futures Appeals Tribunal. The Process Review Panel for the SFC (PRP) was established in 2000 to review and advise the SFC on the adequacy of the internal procedures and operational guidelines governing the actions and operational decisions it takes in the performance of its regulatory functions. The PRP's ninth annual report, which was published in September 2010, concluded that the SFC had generally followed its internal procedures in handling cases under review.

The SFC's work is wide in scope. It starts with setting standards for industry participants using a licensing system and extends to the supervision and monitoring of intermediaries, enforcement of securities laws and rules, the regulation of the public marketing of collective investment schemes (such as mutual funds), maintaining the quality of disclosure of listing applicants and securities issuers jointly with SEHK, oversight of takeovers, mergers and privatisations of listed companies and supervision of markets including the exchanges and clearing houses. In addition, the SFC also assumes the statutory role of educating investors of the risk of investing and the importance of making informed investment decisions.

At the end of 2010, there were 38 022 licensed persons, including securities brokerage firms, futures dealers and securities margin financiers, as well as their