Hong Kong Exchanges and Clearing Limited (HKEx) welcomes the Government's decision to adopt the report of the Working Group on the Business Environment of the Stockbroking Industry. HKEx is pleased to have had the opportunity to participate in the Working Group and looks forward to working closely with the Government and the Securities and Futures Commission (SFC) on ways to assist small and medium-sized brokerages in strengthening their competitiveness in the current business environment.

In connection with its participation in the Working Group, HKEx will implement the following initiatives, among others, in phases:

Rationalisation of regulatory requirements and the associated fees

With effect from 1 April 2003, the requirements for registration of Sales Representatives, approval of Branch Offices, appointment of Branch Office Managers and issue of Branch Certificates have been abolished along with the fees and charges related to the requirements. Also, the requirement for prior written approval of the Stock Exchange for any change in the share capital structure a Stock Exchange Participant and payment of the related fees has been replaced by a notification requirement with no related fees or charges.

In addition to the above, with effect from 2 May 2003, fees for the following will be removed:

1. Inspection of Registers of Stock Exchange Participants, Stock Exchange Trading Rights, Authorised Clerks, Registered Users, Responsible Officers and others and provision of copies of extracts from such Registers;
2. Registration of an Authorised Clerk;
3. Registration of Options Officers and Options Representatives;
4. Registration of a Responsible Officer;
5. Application for change of control except change in directors; and
6. Application for appointment of directors.

HKEx will further discuss its fees and charges with the SFC as part of an ongoing review. The review is aimed at streamlining and rationalising HKEx's fee structure, maintaining its competitiveness and maintaining the competitiveness of its exchanges and clearing houses, with due regard to HKEx shareholders' interests. The review's impact on HKEx is expected to be broadly revenue neutral.

Upgrading market infrastructure: New Investor Participant account model

HKEx has been working closely with the SFC and the brokerage community in developing a user-friendly and cost-effective version of the Central Clearing and Settlement System's Investor Participant (IP) account that would have straight-through processing (STP) capability. HKEx believes that this would help enhance the competitiveness of the small and medium-sized brokerages. HKEx needs to carefully examine whether there is a business case for investing in such an initiative before going ahead with it. Setting up an STP IP account system would require heavy capital investment and the system's operations would incur substantial recurrent costs. HKEx will explore with the SFC possible means of funding both the initial investment and the subsequent operations of the proposed project.

The Working Group report is available on the Government's website at www.info.gov.hk/fstb/fsb/info/stockbroking2.htm.