1. The Stock Exchange of Hong Kong shares the Government’s objectives to increase the competitiveness of the securities and futures market in Hong Kong amidst growing international competition. 
2. The Exchange will study in detail the reform proposed by the Financial Secretary in his Budget Speech today. 
3. The Council today asked the Executive Committee to follow up on the proposal. The Council has also instructed the Executive Committee to appoint a financial adviser to the Exchange as soon as possible. 
4. The Exchange will consult its members on the Government's proposal and work closely with the Government, the Securities and Futures Commission as well as other market operators in response to the call by the Financial Secretary for reform. 
5. The Exchange considers that the future blueprint will ensure the overall interests of Hong Kong as a major financial centre and that the lawful rights of all interested parties will be equitably addressed.

BACKGROUNDER

The global securities and futures industry is evolving rapidly and exchanges face increasing competition from each other. In addition, independent trading systems equipped with advanced technology are threatening the traditional exchanges.

Exchanges worldwide are reexamining their strategies, structures and operations to improve their services, reinforce competitiveness and optimise performance. Vertical integration linking trading, clearing and settlement operations and horizontal mergers combining cash, derivatives and futures markets are taking place in various markets. Consolidation and alliance in international financial markets are growing trends.

The exchanges in Frankfurt, Stockholm, Amsterdam, Italy and Australia have demutualised and some have listed their own shares. The cash and futures markets in Brussels, Australia and Singapore are examining merger proposals. In the US, National Association of Securities Dealers, Inc. has acquired two exchanges for new business in the trading of equity-linked options. There are other examples in other parts of the world.

In its proposal, the Government identified demutualisation, merger and listing of the exchanges to be in the best interests both of Hong Kong and the exchanges' members. They will bring economies of scale, optimise competitiveness, improve the quality of service to market participants, increase market efficiency and resolve role conflicts of the exchanges. They will enable members to raise capital by selling their shares in the Exchange without affecting their trading rights. They will allow Exchange members to share the profits of the Exchange.       

Corporate Communications Department