Hong Kong Exchanges and Clearing Limited (HKEx) today announces that it will launch its new Derivatives Clearing and Settlement System, or DCASS, on Tuesday, 6 April (5 April being a public holiday).
The rollout date was set after the successful completion of the three market rehearsal sessions in February 2004. The plan was recently approved by the Securities and Futures Commission.
DCASS will replace the two separate clearing systems that have been used by the HKFE Clearing Corporation and the SEHK Options Clearing House since before they became part of HKEx in 2000. It will provide a common platform for the clearing and settlement of all derivatives products traded on the HKEx markets, including index futures and options, single stock futures and options and interest rate futures contracts, and will allow Futures Exchange and Stock Options Exchange Participants to manage their positions and clearing functions electronically through one single front-end device.
DCASS integrates the derivatives markets not only horizontally but also vertically. Using the same OM technology platform and operational infrastructure as the Hong Kong Futures Automated Trading System, or HKATS, DCASS realises a seamless operational environment for derivatives trading and clearing, thereby not only improving system efficiency, but also reducing Participants' operating costs as hardware, equipment, and network can be shared between trading and clearing operations.
The DCASS architecture is highly flexible. It can easily accommodate new derivatives products and support multiple market environments without major development efforts. This will enable HKEx to implement new market initiatives with a shorter lead-time. On the Participants' side, DCASS will substantially reduce their paper-based operations by providing more online functionality. In addition to terminals, DCASS also provides an Application Programming Interface (API) option for Participants. The availability of the API enables Participants to connect their back-office applications to DCASS on a host-to-host basis and further improves Participants' operational efficiency through straight-through processing.
As a prudent measure, the introduction of DCASS will be followed by a system stabilisation period ending on 21 April 2004. During that period, the current clearing and settlement systems for futures and stock options will be maintained on a standby mode as backup for possible contingencies. "DCASS, with its open and flexible system design, and its online function capability, will help us and our Participants operate more efficiently," said Paul Chow, chief executive of HKEx. "The market will also benefit from PRiME (Portfolio Risk Margining System of HKEx), the new margining sub-system we are introducing with DCASS for use with all our futures and options contracts. PRiME provides a very prudent and equitable assessment of the risks and margin requirements of derivatives market participants and thus offers better protection to the clearing houses.
"We thank our Participants for their support during the development of DCASS. With DCASS, I am confident that we will be better able to serve our market and meet future challenges," Mr Chow added.
"Following the upgrade of CCASS (Central Clearing and Settlement System) in May and the HKATS software upgrade in October last year, the launch of DCASS will mark the completion of the major infrastructure projects that were implemented after the merger of the exchanges and clearing houses in 2000. We will now focus on further enhancing the capacity and efficiency of our market infrastructure to ensure it continues to meet the changing needs of the marketplace," Mr Chow said.
Further information about DCASS is available on the HKEx website at http://www.hkex.com.hk.