The Stock Exchange of Hong Kong ("SEHK") and the Hong Kong Futures Exchange ("HKFE") have jointly announced, together with Hong Kong Exchanges and Clearing Limited ("HKEC"), the successful conclusion of the negotiation of the merger of the exchanges and clearing houses. The proposals will now be put to the shareholders of the exchanges for their approval.

HKEC has agreed that no new eligibility to trading rights will be granted for 2 years from the date that the proposals become effective. Thereafter, in years 3 and 4, no new eligibility to trading rights will be granted by HKEC for less than HK$3 million for the cash market and HK$1.5 million for the futures market. Current SEHK and HKFE shareholders will also be able to transfer their eligibility to trading rights, once only, for a period of 10 years.

Under the proposals, SEHK and HKFE shareholders will be offered shares in HKEC and the opportunity to receive cash in place of some or all of the shares in HKEC to which they are entitled, subject to the overall aggregate limits on the amount of cash being made available respectively to the shareholders of the two exchanges. The consideration under the proposals represents an exchange ratio as between SEHK and HKFE members of 70:30, respectively.

SEHK Council members and the directors of the HKFE believe that the combination of the exchanges and clearing companies under HKEC will reinforce Hong Kong's strength and competitiveness in the international financial markets and is in line with the global trend towards consolidation in the industry. Both exchanges' ruling bodies believe that the market reform as proposed by the Financial Secretary of the Government of the Hong Kong SAR is vital to the future development of Hong Kong's financial services industry and that it will be critical to maintain and strengthen further Hong Kong's position as a global financial centre in the increasingly competitive international securities and derivatives market.