The Securities and Futures Commission (SFC) and Hong Kong Exchanges and Clearing Limited (HKEx) signed a Memorandum of Understanding (MOU) today in Hong Kong. The signatories to the MOU were Mr Andrew Sheng, Chairman of the SFC, and Mr Charles Lee, Chairman of HKEx.

The MOU formalises the SFCs oversight of HKEx and its subsidiaries, the supervision of Exchange Participants and market surveillance. After the coming into effect of the Exchanges and Clearing Houses (Merger) Ordinance, the SFC and HKEx have established new arrangements for the effective discharge of their regulatory responsibilities to reduce any areas of duplication of function and to facilitate a smooth and co-operative working relationship.

The MOU clarifies that except in relation to management of business risk, market surveillance and the enforcement of the trading and clearing rules, HKEx is no longer directly responsible for prudential and conduct regulation of Exchange Participants, which is the responsibility of the SFC. The SFC is responsible for the licensing and the regulation of the conduct of market participants, enforcing the compliance by market participants with statutory and financial resources requirements and conducting investigations of breaches of laws, infringement of the codes, rules and regulations that it administers relating to the securities and futures markets, including complaints received from the public.

The MOU also covers matters in relation to procedures for consultation, rule amendments by HKEx, approving fees imposed by HKEx in its capacity as a recognised exchange controller, notification of serious matters to the other party, referral of matters, sharing of information and contingency arrangements.

Mr Andrew Sheng said, "The merger and demutualisation of the exchanges and clearing houses were important milestones in reinforcing Hong Kongs position as a global financial centre. This MOU serves to set out the new regulatory rationalisation arrangements where the SFC will become the primary regulator of market participants. This will allow HKEx to concentrate on strengthening its position in the global markets. We look forward to the continuing close co-operation with HKEx."

Mr Charles Lee said, "HKEx welcomes the entering into this MOU with the SFC and together in the spirit of mutual co-operation, the two organisations will work towards making Hong Kong a leading global financial centre."

The MOU between the SFC and HKEx has been published on the SFC web-site (at http://www.hksfc.org.hk) and the HKEx web-site (at http://www.hkex.com.hk ).