Status Report on New Product and Market Development Initiatives (Status as of 15 April 2011)

Corporate

29 Apr 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 January 2011	Status on 15 April 2011
1.	Possible changes to the requirements for overseas companies seeking listings in Hong Kong	The listing of Brazil’s Vale SA is a pilot which may point to a possible model for an increased-disclosure approach to the listing of overseas companies in appropriate cases.	HKEx is currently reviewing all requirements for overseas companies, including those seeking secondary listings in Hong Kong and will consider whether to issue a consultation paper.
2.	Consultation paper on Review of the Code on Corporate Governance Practices and Associated Listing Rules	The consultation paper was published on 17 December 2010 and the deadline for responses is 18 March 2011. HKEx will analyse respondents’ comments and publish its consultation conclusions in due course.	HKEx is analysing more than 100 responses received and plans to publish consultation conclusions later this year.
3.	Consultation Paper on Proposed Changes to Requirements for the Listing of Debt Issues for Professional Investors Only	The consultation paper was published on 17 December 2010 and the deadline for responses is 18 February 2011. HKEx will analyse respondents’ comments and publish its consultation conclusions in due course.	HKEx received six responses, all of which are supportive. HKEx plans to publish the consultation conclusions and proposed Rule amendments in mid-2011.
4.	Consultation on the placing of shares at initial public offering (IPO) and pre-IPO investments	The Exchange has commenced soft consultations with the market on the policy matter and will consider whether to issue a consultation paper.	In progress.
5.	Reporting on environmental and sustainability issues	HKEx will engage external consultants to organise workshops for issuers in 2011 on how to conduct environmental, social and governance (ESG) reporting. The workshops will be based on a draft proposed Guide to Environmental, Social and Governance Reporting.	HKEx will organise a series of training seminars and workshops between May and July 2011 to help equip listed companies with practical tools necessary for ESG reporting. HKEx will consult the market on a draft ESG Reporting Guide after the training seminar and workshop, which will be based on the draft Guide.
6.	Joint Consultation Paper on Proposed Changes to Property Valuation Requirements	The joint consultation paper was published on 3 December 2010 and the deadline for responses is 11 February 2011. HKEx will analyse respondents’ comments and publish its consultation conclusions in due course.	HKEx is analysing over 50 responses received and plans to publish consultation conclusions in due course.
7.	Update on SPRINTS, the Structured Products Integrated Transaction System	User acceptance testing of SPRINTS is currently underway and is expected to be completed around the end of January. Details of user training and rollout arrangement will be provided to issuers in due course. HKEx will continue to work closely with issuers to achieve successful implementation of the new system in the second quarter of 2011.	User acceptance testing of SPRINTS and the trial test with issuers were completed in the first quarter. HKEx conducted two user training sessions on 29 and 31 March, with around 70 representatives of structured product issuers participating in the sessions. HKEx plans to launch the new system in May this year, subject to the successful completion of end-to-end testing with issuers.
8.	Consultation Paper on Ex-entitlement Trading and Shareholder Approval	The consultation paper was published on 17 December 2010 and the deadline for responses is 28 February 2011. HKEx will analyse respondents’ comments and publish its consultation conclusions in due course.	HKEx received over 40 responses with the majority supporting ex-entitlement trading after shareholder approval. HKEx plans to publish the consultation conclusions and proposed Rule amendments in mid-2011.
9.	Simplification of prospectuses and related documents	Not included in this issue.	HKEx has completed the simplification of the formal notice and commenced soft consultations with the market on the simplification of the summary section of prospectuses. HKEx is also considering making amendments, among others, to the application forms and relevant application sections in the prospectuses.
10.	Study on after-hours Derivatives Trading	HKEx has been conducting a study and soft consultation with market participants. Initial feedback was positive. After-hours derivatives trading would help improve execution efficiency and trading arrangements. HKEx plans to publish a consultation paper to seek market views on the proposal in the middle of the year.	HKEx is preparing a consultation paper that is tentatively scheduled to be published in the middle of this year.
11.	Exploration of New Financial Products/ Services and Review of Existing Products/Services	Volatility Index-related Products HKEx and an index company have completed the solicitation of comments from market participants regarding the adoption of volatility index methodology required for the Hong Kong market. Meanwhile, HKEx is exploring the possibility of introducing a futures contract on the volatility index with market participants and its potential design. Synthetic Futures Not included in this issue.	The HSI Volatility Index, which is derived from Hang Seng Index Options prices, was introduced on 21 February 2011. HKEx and Hang Seng Indexes are working together to educate the market about the index and promote public awareness. HKEx is also assessing demand for a futures contract on the HSI Volatility Index. HKEx announced that synthetic futures will be introduced in the stock options market on 9 May 2011. Synthetic futures are created with a standard combination trading function comprising two option legs, call and put. Investors can use synthetic futures to gain or hedge delta exposures in stock options portfolios.
12.	T+2 Finality for Stock Exchange Trades and Settlement Instructions	HKEx has issued a detailed description of the CCASS operational workflow under T+2 Finality to Designated Banks for their preparation for system enhancements. Implementation is tentatively scheduled for July 2011, subject to regulatory approval.	HKEx has arranged a series of briefing sessions with Designated Banks and CCASS Participants to prepare for a market-wide rehearsal in June to ensure market readiness before launch.
13.	Consultation on a Scripless Securities Market	The Scripless Securities Market Working Group is continuing discussions on the details of the proposed operating model. The discussions will facilitate the drafting of the new subsidiary legislation under the Securities and Futures Ordinance by the SFC for consultation in the first half of 2011.	The Scripless Securities Market Working Group has completed discussions on high level details of the proposed operating model. This will facilitate the drafting of new subsidiary legislation under the SFO by the SFC for consultation around June this year. The Working Group is continuing discussions on the outstanding issues and technical details to prepare for implementation.
14.	Derivatives Market System Capacity and Technology Upgrade	Phase 2, which upgrades the design of DCASS software, will be rolled out in mid-2011. Circulars outlining the changes will be issued to Participants shortly so they will have sufficient detail and lead time to prepare. Testing sessions will be held later for those Participants using the DCASS OAPI interface.	User acceptance testing of the DCASS Phase 2 upgrade is currently underway and implementation is scheduled in the second half of 2011.
15.	Securities Market System Capacity and Technology Upgrade (also known as AMS/3.8 and MDS/3.8)	HKEx expects the upgrades to be completed by the end of 2011. Technical specifications have been posted on the HKEx website. HKEx arranged seminars in November 2010 for participants’ IT development staff and system vendors.	The simulation test package was delivered to participants with Broker Supplied Systems in February 2011 for their software development and testing. The development of AMS/3.8 and MDS/3.8 software by HKEx has been completed and internal testing is in progress. End-to-end testing with participants and information vendors is scheduled to commence in July 2011.
16.	Free Prices Website Service to be expanded and repackaged to Basic Market Prices Service	HKEx has reviewed the Pilot Programme for the Free Prices Website Service and decided to open up the service beginning 1 April 2011 in the form of a standard service package offered to all its licensed real-time data information vendors.	The Basic Market Prices (BMP) Service was successfully launched on 1 April 2011. HKEx started providing investors with real-time basic prices from the securities and derivatives markets through a wider range of information vendors which can then offer the data on interactive platforms such as websites and mobile applications. As of early April, there were 23 websites and 10 mobile applications offering the BMP Service.
17.	Introduction of PRS Plus–a new faster derivatives market datafeed	HKEx plans to roll out the new and faster real-time datafeed in the second quarter of 2011. PRS Plus will be offered as an option alongside the current PRS feed. The content of the datafeed and message format will be identical except that PRS Plus will have a shorter price update interval. HKEx plans to shorten the price update interval in HKATS from 1 second to 0.5 seconds in the first quarter of 2011, which will effect the same change to the current PRS feed. The price update interval of PRS Plus at launch will be 0.1 second, one-fifth that of the PRS feed.	The PRS Plus datafeed was successfully launched on 11 April 2011. Eighteen IVs have subscribed to the new datafeed and 18 EPs (mainly market makers) have obtained the end-user licence for PRS Plus.
18.	Establishment of Clearing House for Over-the-counter (OTC) Derivatives Traded in Hong Kong	HKEx has decided to establish a clearing house by the end of 2012 for derivatives traded in Hong Kong’s OTC market. Interest rate derivatives and non-deliverable forwards will be the initial products handled. HKEx is considering different operating models and shareholder structures for the clearing house, which will be run independently of HKEx’s other clearing houses.	HKEx is devising the detailed operating model and risk management framework and will start discussions with market participants in the coming months. HKEx has issued a Request for Information inviting IT vendors to submit responses for an OTC clearing system solution.

Initiative		Status on 15 January 2011	Status on 15 April 2011

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 is added after the date at the top of the column from time to time.

Ends

Updated 29 Apr 2011