Status Report on New Product and Market Development Initiatives (Status as of 16 January 2012)

Corporate

31 Jan 2012

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 24 October 2011	Status on 16 January 2012
1.	Possible Changes to the Requirements for Overseas Companies Seeking Listings in Hong Kong, including those seeking secondary listings	HKEx has been conducting soft consultations with market practitioners and is considering the feedback received.	HKEx is working closely with the Securities and Futures Commission (SFC) with a view to releasing a consultation paper within a few months. The objectives are to clarify and streamline the requirements for listing overseas companies and to provide a disclosure-based approach to secondary listings of seasoned issuers from reputable overseas exchanges.
2.	Consultation Paper on Review of the Code on Corporate Governance Practices and Associated Listing Rules	The consultation conclusions and proposed Rule amendments are scheduled to be published on 28 October 2011.	The consultation conclusions were published on 28 October 2011. Most Rule amendments took effect on 1 January 2012; Corporate Governance Code and certain Rules will become effective on 1 April 2012. HKEx organised a series of 10 free seminars in November and December 2011 to provide training and practical guidance on Listing Rule amendments on corporate governance and practical issues relating to Rule compliance. One of the seminars has been recorded and posted on HKEx website as a webcast. In January 2012, HKEx presented the same seminar in Putonghua in Hong Kong, Shanghai and Beijing. One of the Putonghua seminars has also been posted on the HKEx website as a webcast.
3.	Consultation on the Placing of Shares at Initial Public Offering (IPO) and Pre-IPO Investments	HKEx is considering whether to issue a consultation paper.	At the moment, the interim guidance issued by the Listing Committee appears to be well understood and accepted by market participants. HKEx will monitor developments carefully to see if further guidance is needed.
4.	Reporting on Environmental and Sustainability Issues	Materials from HKEx’s seminars and workshops on environmental, social and governance (ESG) reporting together with the frequently asked questions were posted on HKEx website.	A consultation paper on the draft ESG Reporting Guide was published on 9 December 2011 and the deadline for replies is 9 April 2012.
5.	Simplification of Prospectuses and Related Documents	HKEx will publish guidance letters on the simplification of the summary section of prospectuses and the application forms in due course.	HKEx published a guidance letter, GL 27-12, on the HKEx website on 12 January 2012 to give guidance on how to draft the “Summary and Highlights” section of prospectus in a way that is concise, easy to read and in plain language.
6.	Study on After-hours Derivatives Trading	HKEx has completed the analysis of the comments it received on its consultation paper on after-hours derivatives trading and will publish the consultation conclusions in due course.	On 15 December 2011, HKEx published the consultation conclusions and announced its plan to introduce after-hours derivatives trading. The target for implementation is the second half of 2012.
7.	Exploration of New Financial Products/Services and Review of Existing Products/Services	Volatility Index-related Products The Securities and Futures Commission (SFC) approved the proposed Rule amendments for HSI Volatility Index (VHSI) futures. HKEx is assessing the market readiness for trading VHSI futures and will announce the launch date in due course. RMB-traded Stock Options The SFC 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.	VHSI futures will commence trading on 20 February 2012. HKEx is rolling out educational and marketing activities for VHSI futures. The RMB readiness test for Exchange Participants and Clearing Participants was held on 14 January 2012.
8.	Consultation on a Scripless Securities Market	The drafting of the consultation on the new subsidiary legislation under the SFO is in progress.	The Scripless Securities Market Working Group has completed its study of the operational details of the proposed model which will form the basis for the SFC’s consultation on the new subsidiary legislation under the SFO in 2012.
9.	Derivatives Market System Capacity and Technology Upgrade	User acceptance testing is near completion and production rollout is scheduled for end of 2011.	The upgrade was implemented on 12 December 2011.
10.	Securities Market System Capacity and Technology Upgrades (also known as AMS/3.8 and MDS/3.8)	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.	The upgrades were implemented on 5 December 2011.
11.	Hosting Services	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.	HKEx has been developing the operational model and service offerings of Hosting Services to prepare for service launch in 2012. Total capacity of the hosting floors inside the new HKEx Data Centre can support up to 1,200 equipment cabinets; Phase 1 of around 320 cabinets will be made available to Exchange Participants, information vendors, technology and communications providers, which will be able to interact within the ecosystem, in the fourth quarter of 2012.
12.	Establishment of Clearing House for Over-the-counter (OTC) Derivatives Traded in Hong Kong	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.	HKEx responded to the consultation on legislative amendments. System implementation has started and the risk management and operations models are being finalised. HKEx is also engaging potential Participants.
13.	Next Generation Market Data System (NGMDS)	Not included in this issue.	HKEx has begun developing a new market data system to consolidate the market data distribution for all HKEx’s asset classes through a single platform. The NGMDS is targeted to be rolled out in HKEx’s securities market in around mid-2013.

Initiative		Status on 24 October 2011	Status on 16 January 2012

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 31 Jan 2012