1. Consultation on proposed amendments to the Listing Rules relaing to Corporate Governance issues

Proposed amendments to the Listing Rules relating to corporate governance issues
A report on conclusions from the market consultation was issued on 17 January 2003 . Rule amendments were considered by the Listing Committee in mid-August 2003 . A small number of outstanding items are due for consideration by the Listing Committee early in the fourth quarter of 2003. HKEx will update the market on the issues thereafter.
Exposure of draft code on corporate governance practices and corporate governance report Not included in this issue.

The amended Listing Rules relating to the corporate governance issues are expected to be announced in the first quarter of 2004.*
The exposure paper on the draft code on corporate governance practices is expected to be published in the first quarter of 2004.
HKEx aims to publish the final code on corporate governance practices in the first half of 2004*.

2. Consultation on proposed amendment to the Listing Rules relating to initial listing criteria and continuing listing obligation

Not included in this issue.

A report on conclusions from the market consultation and rule amendments was considered by the Listing Committee in mid-December 2003 . HKEx aims to publish the conclusions and release a marked-up English version of the rule amendments on the HKEx website in the first quarter of 2004**.

3. Regulation of sponsors and independent financial advisers

Consultation period ended on 31 July 2003. Responses are currently being analysed. HKEx anticipates publishing the results and conclusions in the fourth quarter of 2003.

Submissions on the consultation paper were jointly published by HKEx and the Securities and Futures Commission (SFC) on 3 November 2003 . The preliminary consultation conclusions were considered by the Listing Committee in December 2003 and are being discussed with the SFC with a view to publishing the results and conclusions in the first quarter of 2004.

4. Exploration of new financial products and review of existing products

China-related stock index futures

HKEx expects to announce in late October 2003 details on the introduction of a stock index futures contract on Mainland incorporated companies listed in Hong Kong.
Exchange Traded Funds
Not included in this issue.

H-shares Index Futures commenced trading in the derivatives market on 8 December 2003. HKEx is conducting a feasibility study of introducing H-shares Index Options.
Exchange Traded Funds
First Exchange Traded Fund on H-shares commenced trading on 10 December, 2003.HKEx is reviewing the market-making mechanism for Exchange Traded Funds.

5. Enhancement of the transparency of the odd-lot market

Not included in this issue.

The trade data from the odd-lot market will be disseminated to information vendors after enhancements to AMS/3 (Third Generation Automatic Order Matching and Execution System) in the first quarter of 2004.

6. Consultation on reducing board lot size and narrowing minimum spreads

An internal review of the trading spreads is in progress as part of the preparations for the publication of a consultation paper on the subject.

HKEx is informally discussing trading spreads with market practitioners. The issue will be reviewed in 2004.

7. Integration of derivatives clearing systems

The DCASS (Derivatives Clearing and Settlement System) launch is scheduled for the first quarter of 2004. DCASS will replace TOPS, the stock options clearing system operated by The SEHK Options Clearing House (SEOCH), and INTRACS/400, the futures and options clearing system operated by the HKFE Clearing Corporation (HKCC).

The DCASS launch is scheduled for the first quarter of 2004. A Production Readiness Test (PRT), with 35 selected Participants, will be conducted in January 2004 to ensure the proper functioning of DCASS. Subject to the successful completion of the PRT, the second-phase trial, the Market Rehearsal, will be conducted in February 2004 with the involvement of all HKCC, SEOCH and Futures Exchange Participants.

8. Enhancement of IP (Investor Participant) Accounts in the Central Clearing and Settlement System (CCASS)

The proposed consultation on enhancement to CCASS IP Accounts is now rescheduled for late 2003/early 2004.

A consultation paper on an enhanced IP model will be issued in early 2004. Separately, a list of easy-to-implement enhancements to the IP service has been identified and is under review by management.

9. Scripless market (as recommended in the 1999 report by the Steering Committee on the Enhancement of the Financial Infrastructure)

Publication of a consultation paper on a proposed operational model for a scripless securities market is planned for the second half of October 2003 . HKEx welcomes any comments from the market on the proposed operational model during the two-month consultation period which will end in December 2003 .

The consultation ended on 23 December 2003. Responses were received from brokers, custodians, the Federation of Share Registrars and other associations which represent banking, law, securities and other sectors. Some market practitioners requested and received permission to submit comments after the deadline. HKEx is reviewing the responses and studying the potential impact of a scripless market, and it will continue its discussions with the SFC and market stakeholders.

10. Consolidation of Clearing Houses

HKEx is evaluating the pros and cons of consolidating its three clearing houses which are now providing clearing and settlement services for the securities market, futures market and stock options market respectively.

HKEx is studying the risk profile of the cash and derivatives markets and will perform a cost-benefit analysis on various consolidation approaches.

11. Network consolidation

Not included in this issue.

HKEx is exploring the possibility of consolidating the networks of AMS/3, CCASS/3 (Next Generation Central Clearing and Settlement System), HKATS (Hong Kong Futures Automated Trading System), Market Data Feed and other systems to reduce its costs and Exchange and Clearing House Participants' costs without sacrificing service quality.