| 1. |
Review of the derivative warrant market |
HKEx submitted comments on
27 January to the Securities and Futures Commission (SFC) on the Commission’s report on the derivative warrant market in Hong Kong.
On 31 March, the SFC published an update on its Six-Point Plan for Hong Kong's derivative warrant market. HKEx looks forward to working closely with the SFC and the industry to finalise and implement those initiatives deemed appropriate for further improving the derivative warrant market in Hong Kong. |
A number of amendments to the Listing Rules will be considered at the next Listing Committee policy meeting, scheduled for this month. They deal with two of the points in the six-point plan: banning commission rebates and facilitating further issues.
HKEx will work with the SFC and industry to tighten the current Liquidity Provider provisions in the Listing Rules and to provide documents in more accessible language, and it will continue its investor education efforts.
The SFC is expected to publish revised marketing guidelines soon.
HKEx has implemented its online Derivative Warrant Resources Centre with centralised and expanded information on all derivative warrants along the lines recommended by the SFC. Other SFC initiatives are scheduled to be considered at the next Listing Committee policy meeting.
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| 2. |
Amendments to the Listing Rules to require Main Board issuers to publish short announcements in newspapers instead of full announcements |
Responses to the exposure paper have been posted on the HKEx website. A draft exposure conclusions paper and proposed final rule amendments will be considered by the Listing Committee in the near future.
Work on the enhancement of HKEx’s electronic systems for the submission and dissemination of regulatory information and associated disaster recovery measures is underway. |
HKEx published on 7 July its Exposure Conclusion on the Abolition of the Requirement for Main Board Issuers to Publish Paid Announcements in Newspapers and Related Matters, which noted overwhelming support from respondents.
HKEx has decided that the total abolition of the requirement should be preceded by a six-month transitional period (Phase 1). During Phase 1, issuers must publish in newspapers a notification of the announcements and post the full version on the HKEx website and the issuers’ own websites. Further announcement will be made regarding the commencement date for Phase 1, which is currently intended to be at least six months after the publication of the Conclusion, subject to operational readiness.
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| 3. |
Review the composition and structure of the Listing Committees |
In February, HKEx published the way forward on the structure for listing decision-making. The revamp will be addressed in two phases. Changes in the first phase include expanding the Listing Committee to a minimum of 28 members, at least eight of whom will be investor representatives. Another change is that the Listing Nominating Committee now comprises three non-executive directors of HKEx, and the chairman and two executive directors of the SFC. |
The first phase has been completed. Rule amendments published on 3 February became effective in February and May. Pursuant to the Rule amendments, amongst other things, the Stock Exchange has increased the size of the Listing Committee and increased the number of investor representatives on the Committee.
The second phase will be initiated once there is a clear conclusion by the Government and the SFC regarding proposals to give statutory backing to some of the Listing Rules.
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| 4. |
Review of the Growth Enterprise Market (GEM) |
The deadline for submissions on the discussion paper is 30 April. HKEx will consider the comments received and, if appropriate, formulate specific proposals and initiatives for GEM which will be the subject of a consultation paper at a later date. |
At the close of the exposure period, which was extended one month to 31 May, HKEx had received 16 submissions. The submissions were posted on the HKEx website on 16 June. HKEx is studying respondents’ comments and will announce the way forward in due course.
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| 5. |
Phase 2 Reductions of Minimum Securities Trading Spreads |
The HKEx Board has approved the Phase 2 proposal for the reduction of minimum trading spreads, which applies to securities trading between $0.25 and $20. Subject to the approval of the necessary rule changes by the SFC, the Phase 2 proposal is expected to be implemented in July. Market participants will be informed of the implementation details as soon as they are available. |
The HKEx Board has decided to implement the Phase 2 reduction of minimum securities trading spreads in two phases, with Phase 2A — covering securities trading between $2 and 20 — to be implemented this month after completion of a market rehearsal and subject to the approval of the necessary rule changes by the SFC. During the six months from its implementation, HKEx will monitor the results of Phase 2A and will proceed in the first quarter of 2007 with Phase 2B, which covers securities trading between $0.25 and $2, provided no systemic problems arise in Phase 2A.
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| 6. |
Exploration of new financial products / services and review of existing products / services |
Callable Bull/Bear Contracts (CBBC)
HKEx plans to introduce a market for CBBC in June. The market will be developed with the requisite market education measures. |
The CBBC market infrastructure was introduced on the first Monday of June and trading of CBBC commenced in the securities market a week later. The initial batch of CBBC, comprising a total of seven contracts from four issuers, was listed on the Stock Exchange on 12 June.
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Introduce new Combo orders
HKEx is studying the feasibility of the introduction of tailor-made Combo orders in the derivatives market. In mid-March, HKEx introduced Standard Combination Order Books for selected Hang Seng Index Option strategies in the derivatives market. HKEx will assess the market demand as well as the capacity impact on the trading system following the March rollout.
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HKEx continues to examine the feasibility of the introducing
tailor-made Combo orders in the derivatives market. |
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Derivatives market business concepts
Not included in this issue. |
HKEx is assessing market demand for new index futures products based on finance-related H-share companies. It is also exploring option contracts with more expiry months.
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| 7. |
Review of market maker model for derivatives market |
HKEx plans to discontinue registration of Registered Traders, who are not Exchange Participants, and to register and hold responsible Exchange Participants as market makers for Futures Exchange products.
The new model is aimed at strengthening the roles of Exchange Participants and enhancing the quality of market makers as there will be prescribed minimum qualifications for third parties who participate in market-making activities.
HKEx will seek preliminary approval from the SFC on the particulars of the model.
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HKEx is finalising the review and will seek approval of the proposed model in the third quarter. |
| 8. |
Harmonisation of collateral policies for the three clearing houses |
HKEx is preparing amendments to the rules and procedures of the respective clearing houses in relation to the admission of the new types of non-cash collateral.
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HKEx is reviewing the draft amendments to the rules and procedures of the respective clearing houses in relation to the admission of the new types of non-cash collateral. |
| 9. |
Network consolidation for major market systems on a new network (SDNet) |
Installation of fibre circuits and routers for CCASS/3 for Participants has been completed Market rehearsals and production readiness tests are being planned Migration of the CCASS/3 network to SDNet is scheduled for June.
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All CCASS/3 circuits were successfully migrated to SDNet on 10 June. The SDNet has been operating reliably and smoothly since the Phase 1 (October 2005) and Phase 2 (June 2006) rollouts. HKEx is now preparing for the rollout of the third and final phase of the SDNet project, the migration of the AMS/3 and MDF networks to SDNet.
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| 10. |
AMS/3 Open Gateway (OG)/Multi-Workstation System (MWS) upgrade |
Due to technology obsolescence, all AMS/3 OGs/MWSs installed in Participants’ premises will be upgraded. The pilot run is planned for June and the mass rollout will commence in the second half of this year. |
Pilot installations involving new hardware and software were completed in June and mass rollout will be started at end of this month.
HKEx has selected vendors for the hardware and software and the upgrading is proceeding as scheduled.
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| 11. |
HKATS / DCASS Network Gateway (NG) upgrade to Windows 2003 |
Due to technology obsolescence,
all HKATS/DCASS NGs installed
in Participants’ premises are in the progress of being upgraded from Windows NT to Windows 2003. HKEx plans to complete the upgrade by the third quarter of this year.
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More than 90 per cent of NGs installed in Participants’ premises were successfully migrated to Windows 2003. The remaining work will be completed in August as planned. |
| 12. |
Expansion of CCASS Investor Account Service |
Not included in this issue. |
The Investor Account service was expanded to Macau individual investors and incorporated companies in early June. HKEx is considering the further expansion of the service.
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