The Stock Exchange of Hong Kong today (Thursday) invites comments from market participants on the proposed market structure for trading of Exchange Fund Notes, following discussions with The Hong Kong Monetary Authority.

"Listing of Exchange Fund Notes helps fulfil the Exchange's intention to evolve into a full-service securities market, in the sense that the introduction of EFN will expand the product range available through the Exchange and capture the full potential of the debt securities market," said an Exchange spokesman. 

The EFN market will be open to all investors; in particular retail investors.  The principal features of the proposed market infrastructure are described below:

1. Trading platform and market making
   The existing AMS trading platform will be used.  Since market making is not supported by this order matching system, it will thus not be available initially for EFN.
   
   
2. Settlement
   Trades conducted will be settled through the CCASS system operated by the Hongkong Clearing on a T+2 basis in line with existing practices on the Exchange.  Clearing will initially be on a trade-for-trade basis, but may later migrate to Continuous Net Settlement (CNS).  A linkage will be established to allow free-of-payment transfers between participants of CMU and CCASS.  Trading will be scripless.
   
   
3. Price Information
   Price information will be displayed by the AMS system and made available to information vendors as at present.  Previous day closing yields for trades conducted in the over-the-counter (OTC) market and settled through the HKMA's Central Moneymarket Unit (CMU) system will be displayed on teletext.
   
   
4. Tendering
   Facilities will be introduced to allow investors to tender for EFN when they are initially offered for subscription by the HKMA.
   
   
5. Transaction Size
   The existing HK$50,000 minimum denomination size for EFN will form a board lot for trading on the Exchange.
   
   
6. Transaction costs
   EFN are exempt from stamp duty.  The existing transaction levy of 0.011% will apply for EFN transactions.  The minimum brokerage commission rate will be reduced from the existing 0.25% to 0.10% for EFN transactions with the minimum commission remaining at HK$50.
   
   
7. Spread Size
   The minimum spread is proposed to be 0.10% representing a price change of HK$50 on each board lot of EFN.

Comments on the proposals or on the future development of the debt market should be submitted to the Exchange on or before February 12, 1999.

Corporate Communications Department