Status Report on New Product and Market Development Initiatives (Status as of 15 July 2008)

Corporate

22 Jul 2008

Status Report on New Product and Market Development Initiatives
(Status as of 15 July 2008)

The following initiatives are subject to market support and regulatory approval so they may not be implemented. HKEx will announce further details of these initiatives as they progress. Selected items were updated after 15 July 2008.

Initiative		Status on 15 April 2008	Status on 15 July 2008
1.	Electronic Disclosure Project (EDP)	The HKExnews website, a website designated for disseminating issuer news, was introduced on 4 February. The website is at: www.hkexnews.hk. A revised policy on suspensions following listed issuers' publication of announcements with price sensitive information was implemented on 10 March. From 25 June onwards, every issuer must have its own website where the public must be able to access documents free of charge.	Since 25 June, all issuers have been required to have their own websites where the public is able to access their Listing Rules-related documents free of charge.
2.	Review of the Growth Enterprise Market (GEM)	HKEx has finalised its consultation conclusions report and the associated rule amendments necessary to reposition GEM as a second board. The rule amendments have been submitted to the Securities and Futures Commission (SFC) for approval. A further announcement will be made in due course with the aim of the revamped regime coming into effect in the third quarter.	HKEx published its GEM Consultation Conclusions on 2 May. Revised GEM Listing Rules and Main Board Listing Rules became effective on 1 July.
3.	Consultation on Periodic Financial Reporting	HKEx is finalising its consultation conclusions and proposed rule amendments and, barring unforeseen circumstances, aims to publish its conclusions report and rule amendments by the end of this quarter.	On 18 July, HKEx published a consultation conclusions document and rule amendments relating to shortening the current deadlines for half-yearly and annual results announcements by Main Board issuers.
4.	Combined Consultation on Proposed Changes to the Listing Rules	HKEx is studying respondents’ comments to the consultation and will take them into account in finalizing the proposed changes to the Listing Rules.	The consultation period closed on 7 April and there were over 100 submissions. All responses are now being analysed. The views expressed by the respondents will be taken into consideration with a view towards balancing their concerns with necessary enhancements to Hong Kong’s regulatory regime.
5.	Possible introduction of depositary receipts	HKEx has conducted a technical consultation with selected market participants and has finalised the rule amendments necessary to introduce a depositary receipts regime. The rule amendments have been submitted to the SFC for approval. A further announcement will be made in due course with the aim of the regime coming into effect early in the third quarter.	HKEx announced details of the framework for issuers to list in Hong Kong through Hong Kong depositary receipts, or HDRs, on 9 May. The framework became effective on 1 July.
6.	Web Proof Information Pack (WPIP)	HKEx is undertaking a review of the pilot scheme.	HKEx and the SFC have been reviewing the pilot scheme and may formally codify the WPIP requirement by amending the Listing Rules.
7.	Proposed introduction of a closing auction session in the securities market	System preparation has been completed and end-to-end testing is in progress. Market rehearsals are scheduled to be held in early May.	The Closing Auction Session was introduced on 26 May. HKEx plans to publish a consultation paper later this year on possible enhancements to the Closing Auction Session, including use of a random closing mechanism.
8.	CCASS Shareholding Disclosure Service	The new service, which is designed to help improve transparency under the current market structure by giving the public online access to the shareholding information of CCASS, the Central Clearing and Settlement System for the securities market, is scheduled to be rolled out on 28 April.	The service was introduced on 28 April.
9.	Exploration of new financial products / services and review of existing products / service	Gold-related products HKEx is working with product issuers and fund managers to facilitate the listing of gold and other commodities-related structured products and Exchange Traded Funds.	HKEx continues to work with product issuers and fund managers to facilitate the listing of gold and other commodities-related structured products and Exchange Traded Funds.
		Gold futures HKEx is looking into resuming trading of a cash-settled gold futures contract and is in discussion with SFC executives on the proposed rules and regulations in relation to gold futures. The earliest possible rollout date would be the third quarter of this year, subject to SFC approval and market readiness.	The rules and regulations in relation to gold futures have been approved by the SFC. HKEx plans to reintroduce gold futures trading in the Hong Kong derivatives market on 20 October.
		An HKEx-Chinese Gold & Silver Exchange Society (CGSE) working group is examining the possibility of allowing CGSE members who obtain a relevant trading licence from the SFC to trade in HKEx's proposed gold futures market.	Working group discussions are continuing. (HKEx announced on 21 July plans to invite applications for non-transferable Hong Kong Futures Exchange Trading Rights from members of the CGSE or their designated affiliates, provided they meet certain criteria, to encourage gold market professionals' participation in the trading of the gold futures to be reintroduced on 20 October. The plan requires regulatory approval of the related amendments to the HKFE Rules.)
		Emissions products HKEx has commenced discussions with external parties regarding the potential for emissions trading in Hong Kong and is continuing to assess the likely demand for such trading.	HKEx is continuing to assess the likely demand for emissions trading and considering possible options.
10.	CCASS/3 capacity and technology upgrade	HKEx successfully completed the upgrade for the data storage and LAN (Local Area Network) infrastructure of CCASS/3 on 25 March for alignment with the AMS/3 capacity and technology upgrade completed in January. CCASS/3 is now able to support 5 million trades per day. The technology upgrade of the CCASS/3 middle-tier system is planned for August to complete the exercise.	The technology upgrade of the CCASS/3 middle-tier system is progressing well and HKEx plans to complete it in August. The technology upgrade facilitates system integration, as well as securing quality support from vendors, thereby safeguarding the reliability and stability of the system. The technology upgrade of the CCASS/3 middle-tier system is the final part of the CCASS/3 capacity and technology upgrade.
11.	Review of Vendor Licensing Procedure and Requirements	HKEx has recently reviewed the requirements for real-time information vendors and decided to strengthen them in three aspects: (i) financial requirements; (ii) technical requirements; and (iii) market transparency in respect of services available to end users. The revised requirements and licence application procedures were published at the end of March and became effective for new applications immediately. They are being put into effect in phases between April and September for existing vendors.	Approved real-time services provided by information vendors with MDF, PRS, Stock Options and IIS (Issuer Information feed Service) licences will be posted on the HKEx website for public reference by the end of the third quarter.

Initiative		Status on 15 April 2008	Status on 15 July 2008

Note:

AMS/3, the Third Generation Automatic Order Matching and Execution System, is the trading system for the securities market. CCASS/3, the Latest Generation Central Clearing and Settlement System, and the Market Data Feed, or MDF, are the other major market systems supporting the securities market. HKATS, the Hong Kong Futures Automated Trading System, is the trading system for the derivatives market. DCASS, the Derivatives Clearing and Settlement System, and PRS, the Price Reporting System, are the other major market systems for the derivatives market.

This report is carried in HKEx’s quarterly publication, Exchange, published on 22 July 2008.

Updated 22 Jul 2008