Second Street-wide Year 2000 Compliance Test Successfully Completed

Market Operations

08 Apr 1999

Joint Press Release by the Securities and Futures Commission, Stock Exchange of Hong Kong, Hong Kong Futures Exchange and Hongkong Clearing

Second Street-wide Year 2000 Compliance Test Successfully Completed

The second round testing on Year 2000 compliance in the securities and futures sector has been completed with positive results.

Member firms, participants, and designated banks of the Stock Exchange of Hong Kong, Hong Kong Futures Exchange, Hongkong Clearing, Stock Exchange Options Clearing House, and the HKFE Clearing Corporation took part in the second round street-wide test held in March 1999. The Securities and Futures Commission was responsible for co-ordination.

The objective of the street-wide tests is to provide facilities for member firms and participants to verify the Year 2000 compliance readiness status of their business operations and back office systems, including hardware and software, that interface with the exchanges and clearing houses.

The latest test was carried out on 20, 21, 27 and 28 March 1999, testing respectively the dates of 30, 31 December 1999, 4 January 2000, and the leap year day of 29 February 2000.

So far, over 95% of all members and participants have taken part in the two rounds of testing. The remainder mainly represents members and participants who use manual systems or whose businesses are inactive.

In the second round testing, initial assessments by the exchanges and clearing houses on the major shared financial systems and their interfaces with member firms and participants showed encouraging results with no major incidents. Some minor incidents not related to Year 2000 compliance were identified and quickly resolved during the test.

As to the compliance status of member firms and participants who have taken part in the second round testing, the exchanges and clearing houses are still awaiting the formal submissions by the individual firms and participants. Full test results will be analysed and further reports will be submitted to the SFC by the exchanges and clearing houses by early May 1999.

Regarding the results of the first round street-wide test held in January 1999, over 95% of member firms and participants have declared no major exceptions in their test results. Follow-up actions are being taken by the exchanges and clearing houses to monitor the progress of those firms which had been unable to deliver satisfactory results. All members and participants are required to make a declaration regarding their Year 2000 compliance status as of 31 March 1999 in April 1999.

The SFC, the exchanges, and clearing houses all regard the Year 2000 issue a very serious matter. Regulatory measures and disciplinary actions may be taken against registrants, member firms or participants who fail to ensure their systems are Year 2000 compliant by the key milestones set by the SFC, the exchanges and clearing houses. To adequately prepare for the century changeover, registrants, member firms and participants are also required to put in place proper contingency plans for their business.

The following summarises the major test information so far:

	Stock Exchange of Hong Kong	Hong Kong Futures Exchange	Hongkong Clearing
Participation in 2nd round testing in March 1999	100 and 19 members enrolled in testing of the Automatic Order Matching and Execution System (AMS) and the Traded Options System (TOPS) respectively, with 95% and 90% actual participation. The enrolled members represented 21% of all AMS members and 37% of TOPS members.	40 active members enrolled (Automated Trading System and Open Outcry), with 98% actual participation. The enrolled members represented 33% of all active members.	90 CCASS participants (82 brokers, 6 custodians, 2 stock pledgees) and 17 designated banks enrolled, with 97% actual participation. The enrolled organisations represented 16% of all CCASS participants and 30% of designated banks.
Aggregate participation in 1st & 2nd round testing	482 and 48 members enrolled in the two tests of the AMS and the TOPS respectively. The enrolled members represented 99% of all AMS members and 92% of TOPS members.	115 active members enrolled. The enrolled members for the two tests represented 95% of all active members.	550 CCASS participants (485 brokers, 60 custodians, 5 stock pledgees) and 57 designated banks enrolled in the two tests. The enrolled organisations represented 98% of all CCASS participants and 100% of designated banks.
Scope of tests/ functions simulated	Simulated transactions were conducted for both the equity and traded options markets in integration with Hongkong Clearing, Stock Exchange Options Clearing House, and HKFE. HSI Services Limited and information vendors also took part.	Automated Trading System; Open Outcry Trading System; Clearing and Settlement System; Price Reporting System; Member Access Services.	All key CCASS functions such as clearing and settlement of exchange and non-exchange trades, and depository and nominee operations.

Meanwhile, the SFC, the exchanges and clearing houses have completed or are in an advanced stage of completing the rectification of their own internal systems, and have commenced the contingency planning process.

Updated 08 Apr 1999