The Stock Exchange of Hong Kong has today (Wednesday) issued a consultative document seeking public views on electronic share applications, ESA.
ESA is an important component of straight through processing proposed by the Exchange. AMS/3, the third generation of the automatic order matching and execution system to be launched in the second quarter of next year, will be the trading platform for the implementation of the straight through process.
The consultative document examines two ESA models, a pre-registration model and a multi-mode model. The pre-registration model calls for the establishment of a registry of investors to enable potential investors to pre-register. They need only register once and their applications for new issues will be automatically processed following their instructions.
The multi-mode model offers a variety of options to meet the different needs of small, regular and large investors.
Small investors may use EPI, electronic payment instructions such as ATM machines, to apply for new shares. An efficient ESA for small investors should be able to capture share application instructions electronically and execute electronic payments to the receiving bank.
Regular investors may also become investor participants in Hong Kong Clearing’s CCASS, the Central Clearing and Settlement System. This will enable them to apply for new issues electronically through the CCASS phone system, its Investor Service Centre, or through CCASS participants acting on their behalf.
Large investors, applicants for shares worth at least $5 million, will still use applications forms, but payment will follow the Hong Kong Monetary Authority’s CIPU, the Conditional, Irrevocable Payment Undertaking proposal.
The Exchange believes it is essential to streamline and automate share application procedures in the long term. This will benefit the Hong Kong market when implemented. It will also enable Hong Kong to maintain its position as a leading international financial centre in Asia.
The consultative paper is available from 1/F, One & Two Exchange Square, Central, Hong Kong; or can be viewed at the Exchange website at http://www.sehk.com.hk.
Comments on the paper should be sent in writing to the Exchange by October 31, 1999.
Corporate Communications Department