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

Corporate

25 Jan 2008

Status Report on New Product and Market Development Initiatives
(Status as of 15 January 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.

Initiative		Status on 15 October 2007	Status on 15 January 2008
1.	Electronic Disclosure Project (EDP)	Phase 2 will commence on 25 December. From that date onwards, Main Board issuers with their own websites will no longer be required to publish notifications in newspapers, while a Main Board issuer without its own website will be required to publish the full announcement in the newspapers as well as on the HKEx website. From 25 June next year onwards, every issuer must have its own website where the public must be able to access documents free of charge.	Phase 2 commenced on 25 December last year. Since 25 December, a Main Board listed issuer with its own website no longer needs to publish notifications in newspapers. A Main Board issuer without its own website must publish full announcements in newspapers as well as on the HKEx website. From 25 June 2008 onwards, every issuer must have its own website where the public must be able to access documents free of charge.
2.	Review of the Growth Enterprise Market (GEM)	Comments on the proposals in HKEx’s consultation paper on GEM should be submitted on or before 31 October. HKEx will consider the comments received and take them into account in planning GEM’s further development.	HKEx is studying respondents’ comments. Responses to the consultation paper were posted on the HKEx website in November last year. HKEx aims to launch the revamped GEM in the third quarter this year.
3.	Consultation on Periodic Financial Reporting	HKEx published a consultation paper on 31 August on possible amendments to the Listing Rules on periodic financial reporting. Comments on the proposals in the consultation paper should be submitted on or before 5 November.	HKEx is studying respondents’ comments and aims to publish the consultation conclusions in the second quarter. Responses to the consultation paper were posted on HKEx website in November last year.
4.	Combined Consultation on Proposed Changes to the Listing Rules	Not included in this issue.	HKEx published a consultation paper on 11 January this year seeking comments from the market on a number of substantive policy issues and minor amendments to the Listing Rules. Comments should be submitted on or before 7 April this year.
5.	Possible introduction of depositary receipts	Work is in hand to develop rules to facilitate the use of depositary receipts as a mechanism for listing within the existing Listing Rules framework for retail equity products.	HKEx aims to announce details of a depositary receipt framework in the third quarter of this year.
6.	Web Proof Information Pack (WPIP)	HKEx has developed proposals for the posting of information packs in the nature of near-final draft prospectuses on the HKEx website prior to initial public offerings. The market response was generally positive and supportive when similar information packs were posted on the HKEx website for the A+H share initial public offerings of ICBC and China Citic Bank.	A pilot scheme requiring new listing applicants to post a WPIP on the HKEx or GEM website, as applicable, prior to initial public offerings commenced on 1 January this year and will be reviewed three months from that date. If no major defects are found in the operation of the scheme, the WPIP requirement will be codified by amendments to the Listing Rules.
7.	Designated Issuer Website	HKEx plans to establish a website solely for the regulatory filings and dissemination of issuer information to provide additional support for the electronic disclosure regime introduced under EDP in June. The website will be developed in stages.	The designated Issuer Website, which is in its final stage of development, is scheduled to be launched in the first quarter this year.
8.	Proposed introduction of a closing auction session in the securities market	Subject to the approval of the necessary rule amendments by the Securities and Futures Commission (SFC), implementation of the closing auction session is tentatively scheduled for the first half of next year.	Introduction of the closing auction session is scheduled for 26 May this year, subject to market readiness and completion of testing and market rehearsals.
9.	Five-digit stock codes	HKEx announced on 8 October that its securities market would introduce five-digit stock codes on 7 April next year, subject to market readiness. HKEx will conduct seminars, testing sessions and rehearsals for market participants and promote public awareness via education materials before implementation.	Introduction of five-digit stock codes is scheduled for 7 April this year to cater for an increase in new equity and structured product listings.
10.	Exploration of new financial products / services and review of existing products / services	HKEx is working with the SFC to facilitate the listing on its securities market of structured products with non-Hong Kong underlying assets and/or with duration beyond five years.	The Stock Exchange’s structured products regime was enhanced in December last year to facilitate the listing of a wider range of Market Access Products and further encourage financial innovation.
		HKEx expects to receive the consultants’ final reports on their studies of the feasibility of trading commodities derivatives and emissions-related products in Hong Kong before the end of the year.	The Board has reviewed the consultants’ reports and recommendations. HKEx will seek to develop its existing businesses further with emissions- and gold-related products such as initial public offerings, Exchange Traded Funds and structured products, and it will explore new emissions- and gold-related business opportunities including carbon trading in Hong Kong and the reintroduction of gold futures.
		HKEx is exploring the possible introduction of a Mini-H-shares Index futures contract similar to its Mini-Hang Seng Index futures contract.	HKEx plans to introduce Mini H-shares Index futures on 31 March this year, subject to SFC approval and market readiness.
11.	Suspension of the tick rule for short selling	HKEx submitted the proposed rule amendments to the SFC in August. The SFC notified HKEx that it needs more time to assess and determine the appropriate time to implement the proposal before approving the rule amendments.	A date for suspension of the tick rule is pending SFC approval.
12.	Introduction of Third Party Clearing (TPC) in the securities market	An explanatory document on TPC, FAQ and a list of clearing service providers have been published on the HKEx website under Market Operations and Infrastructure. Implementation is now progressing on schedule with a tentative launch date in early December this year.	HKEx introduced a framework for Third Party Clearing in its securities market on 3 December last year. The initial market response has been encouraging.
13.	Remote participants in the securities and derivatives markets	HKEx is looking into the feasibility of trading on its exchanges by brokerage service providers that are not incorporated in Hong Kong and have not established a licensed brokerage in Hong Kong. The firms would be admitted as remote participants and required to arrange for their transactions to be cleared by third parties.	HKEx is discussing with the SFC the possible admission requirements and regulatory arrangements for remote exchange participants.
14.	AMS/3 capacity upgrade	The HKEx Board approved in July and September a technology upgrade for the AMS/3 system. Migration of AMS/3 to the new Itanium platform will increase its daily processing capacity at its optimal performance level more than threefold to 5 million trades. The AMS/3 upgrade will be rolled out in January of next year.	HKEx aims to implement the upgrade before the end of January.
15.	CCASS/3 and MDF upgrades	Not included in this issue.	HKEx plans to upgrade CCASS/3 and the MDF in the first quarter of this year to support 5 million trades per day.
16.	Derivatives market system upgrades	HKEx plans to upgrade HKATS and DCASS to application software Release 19.1 by early next year. The internal acceptance test and integration test were completed successfully in September. Production readiness drills and market rehearsals with Exchange Participants are planned for November and December.	HKEx aims to implement the upgrade in the first quarter of this year, subject to market readiness.

Initiative		Status on 15 October 2007	Status on 15 January 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 25 January 2008.

Updated 25 Jan 2008