Status Report on New Product and Market Development Initiatives (Status as of 24 October 2011)

Corporate

08 Nov 2011

Initiatives are subject to change and may require broad market support and/or regulatory approval before they can be implemented. HKEx will announce further details of these initiatives as they progress.

Initiative		Status on 15 July 2011	Status on 24 October 2011
1.	Possible changes to the requirements for overseas companies seeking listings in Hong Kong	HKEx is drafting a consultation paper on the proposed changes to the requirements for overseas companies seeking listings in Hong Kong.	HKEx has been conducting soft consultations with market practitioners and is considering the feedback received.
2.	Consultation Paper on Review of the Code on Corporate Governance Practices and Associated Listing Rules	Responses to the consultation have been published on the HKEx website. Consultation conclusions will be published later this year.	The consultation conclusions and proposed Rule amendments are scheduled to be published on 28 October 2011.
3.	Consultation Paper on Proposed Changes to Requirements for the Listing of Debt Issues for Professional Investors Only	The consultation conclusions and proposed Rule amendments are scheduled to be published in the third quarter of 2011.	The consultation conclusions were published on 21 October 2011. The Rule amendments take effect on 11 November 2011.
4.	Consultation on the placing of shares at initial public offering (IPO) and pre-IPO investments	HKEx is considering whether to issue a consultation paper.	HKEx is considering whether to issue a consultation paper.
5.	Reporting on environmental and sustainability issues	Five training seminars were held in May 2011 for over 800 participants and 10 workshops were held in June and July 2011 for about 1,000 participants. HKEx will conduct market consultation on its draft Environmental, Social and Governance (ESG) Reporting Guide later this year. Subject to market feedback, the ESG Reporting Guide may be implemented as a recommended best practice.	The seminars and workshop materials, together with the frequently asked questions, were posted on HKEx website.
6.	Joint Consultation Paper on Proposed Changes to Property Valuation Requirements	Responses to the consultation have been published on the HKEx website. Joint consultation conclusions will be published later this year.	The joint consultation conclusions were published on 20 October 2011. The Rule amendments take effect on 1 January 2012.
7.	Simplification of prospectuses and related documents	HKEx is in the process of simplifying prospectuses, application forms and relevant application sections in the prospectuses.	HKEx will publish guidance letters on the simplification of the summary section of prospectuses and the application forms in due course.
8.	Study on after-hours Derivatives Trading	The consultation period ended on 8 July 2011. HKEx is analysing the comments it received on the proposal.	HKEx has completed the analysis of the comments received and will publish the consultation conclusions in due course.
9.	Exploration of New Financial Products/Services and Review of Existing Products/Services	Volatility Index-related Products HKEx sponsored an educational Q&A game on the HSI Volatility Index (VHSI) organised by the Hong Kong Economic Times from May to early July 2011. There were over 6,000 participants involved. The design for VHSI futures and proposed Rule amendments have been finalised, pending approval from the Securities and Futures Commission (SFC). RMB-traded Stock Options HKEx completed system preparations for the trading of RMB-traded stock options in June 2011. Relevant Rule amendments are subject to SFC approval and HKEx will introduce the products when demand emerges.	SFC has approved the proposed Rule amendments for VHSI futures. HKEx is assessing the market readiness for trading VHSI futures and will announce the launch date in due course. SFC has approved the proposed Rule amendments for RMB-traded stock options. HKEx has asked its Participants to prepare for readiness to trade RMB-traded futures and options. The RMB readiness test is tentatively scheduled in January 2012.
10.	Consultation on a Scripless Securities Market	The Scripless Securities Market Working Group (SSMWG) has completed the study of the operational details of the proposed model which will form the basis of the SFC’s consultation on the new subsidiary legislation under the SFO. The consultation is planned for the second half of 2011. The SSMWG will continue its discussions to resolve outstanding issues, including technical hurdles, to prepare for the implementation of a scripless securities market.	The drafting of the consultation on the new subsidiary legislation under the SFO is in progress.
11.	Derivatives Market System Capacity and Technology Upgrade	User Acceptance testing has proceeded smoothly and HKEx expects to announce the implementation schedule in the third quarter of 2011.	User Acceptance testing is near completion and production rollout is scheduled for end of 2011.
12.	Securities Market System Capacity and Technology Upgrade (also known as AMS/3.8 and MDS/3.8)	End-to-end testing with Participants and information vendors started on 4 July 2011. The first market rehearsal is tentatively scheduled to be held in September 2011.	Three rounds of market rehearsals were successfully completed as of 24 October 2011, with more than 95 per cent of Exchange Participants and information vendors participating. Production rollout is scheduled for December 2011.
13.	Free Prices Website Service to be expanded and repackaged to Basic Market Prices Service	The Basic Market Prices (BMP) service, which was launched on 1 April 2011, has been well received by the market and is currently available through a total of 28 websites and 12 mobile applications. Under the BMP service, listed companies can display their real-time stock prices on their websites. HKEx expects more BMP services to be provided on different platforms in the near future.	BMP service is now available through 33 websites and 15 mobile applications. Moreover, some listed companies and structured products issuers have started offering the BMP service on their websites to display real-time prices. HKEx expects that the BMP service will be provided under a wider variety of platforms in the near future.
14.	Hosting Services	Not included in this issue.	HKEx will offer Hosting Services at its Next Generation Data Centre. HKEx plans to offer access to its securities market from the fourth quarter of 2012, access to its derivatives market from the second quarter of 2013 and access to its clearing and settlement systems from the fourth quarter of 2013.
15.	Establishment of Clearing House for Over-the-counter (OTC) Derivatives Traded in Hong Kong	HKEx is in the process of devising the detailed business model and risk management framework for the clearing of OTC interest rate swaps and non-deliverable forwards. HKEx has developed a master plan for setting up the OTC market infrastructure in conjunction with the Hong Kong Monetary Authority and has begun to meet with OTC market participants in the past few months to outline the service scope and project implementation plan. In early June 2011, HKEx issued a Request for Proposal inviting leading vendors to submit proposals for implementing the core OTC clearing platform. HKEx is also engaging an international law firm to advise on regulatory and legal issues in relation to the OTC clearing initiative.	HKEx has established two new departments, the OTC Clearing Operations Department and the OTC Clearing Risk Management Department, to be responsible for the OTC clearing business. HKEx completed the platform selection process and will commence implementation work in November 2011. The Treasury Markets Association Sub-group on Central Counterparty (CCP), co-chaired by HKEx and the International Swaps and Derivatives Association, held its first working group meeting in late September 2011. The sub-group is an industry forum to provide market input on business and risk management issues relating to the development of the CCP in Hong Kong for OTC derivatives. HKEx will start reach out individual financial institutions and licensed corporations to seek their input and ascertain their interest to become Clearing Participants in the coming months. The Hong Kong Monetary Authority and the SFC have been developing the regulatory framework for the OTC derivatives market in Hong Kong and they published a consultation paper on key concepts of the proposed regime in October 2011. HKEx aims to begin confirming connectivity with its planned OTC derivatives clearing system in the middle of 2012.

Initiative		Status on 15 July 2011	Status on 24 October 2011

Abbreviations: HSI – Hang Seng Index; RMB – renminbi.

Notes:

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 System, or MDS, 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. Information may be added after the date at the top of the column.

Ends

Updated 08 Nov 2011