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Asian Financial Services Technology Conference Exchanges & Technology Lawrence Fok Deputy Chief Operating Officer Hong Kong Exchanges & Clearing Limited 11 September 2001 1
Macro Factors Reshaping the Global Financial Market
Globalisation
Technological advances 2
The New Financial Landscape A buyers’ market driven by investors’ needs
real-time, any-time trading
ready access to investment information
transparent and liquid secondary market
best price available
low transaction costs
one-stop trading & settlement
a level playing field 3
The New Financial Landscape (cont.) Issuers’ preference
the most liquid market
the largest pool of investors
competitive compliance costs
a level playing field 4
Market Reforms for Hong Kong 1999/2000 Budget Speech of the Financial Secretary
Demutualisation and Merger of Hong Kong’s Exchanges and Clearing Houses
Enhancement of the Market Infrastructure 5
Demutualisation and merger formally completed on 6 March 2000
Company limited by shares
Listed on the Stock Exchange in June 2000 to broaden ownership
Operates all cash and derivatives markets and clearing houses 6
Cardinal Principle To act in the interest of the public, having particular regard to the interests of the investing public.
- Merger Ordinance 7
Enhancement of the Market Infrastructure
A Steering Committee on the Enhancement of Financial Infrastructure (SCEFI) chaired by the Chairman of the Securities and Futures Commission
To Study and Recommend the Necessary Improvements to the Financial Infrastructure of Hong Kong 8
SCEFI Recommendations Initiatives Build Securities and Derivatives Network (SDNet) Upgrade Securities Clearing to Open Architecture Ready Achieve Single Clearing Arrangement Enable Straight Through Processing Consolidate Derivatives Clearing Into A Single Platform Realise Scripless Securities Market Objectives Provide the Foundation for Implementation of Interactive/Message-based Interfaces and Web-enabled Access, and Eventual Consolidation of All Trading and Clearing Networks Upgrade CCASS Architecture to Enable Message based Interface, Gateway and Open Access Implement Single Clearing Arrangement Building Blocks, such as Consolidated Clearing Account Structure, Unified Money Settlement, Portfolio based Risk Management Implement the Straight Through Processing Building Blocks, such as TFM, TRS, CBI Provide A Single Clearing Platform for Derivatives Products Convert Hong Kong To A Scripless Securities Market 9
Post Merger Systems Infrastructure (2000) Trading Clearing Securities Stock Options Futures AMS/3 (N) TOPS HKATS (N) CCASS TOPS OCC Derivatives Trading Integration (August 2001) Trading Clearing Securities Stock Options Futures AMS/3 HKATS HKATS CCASS TOPS OCC Derivatives Clearing Integration (2002) Trading Clearing Securities Stock Options & Futures AMS/3 HKATS CCASS/3 (N) DCASS (N) (N) : new or upgrade 10
Target Clearing Infrastructure Product Specific Clearing Processing
CCASS for Securities
DCASS for Derivatives 11
CCASS Upgrade Project (CCASS/3) Features Functional Architecture Upgrade
Multi-Market Structure
Variable Settlement Cycles (T+x)
Extended Trading Hours 12
CCASS Upgrade Project (CCASS/3) Features Technical Architecture Upgrade
Database Segmentation
Middle-Tier
User Access Options
Browser
API SWIFT (GSTPA)
New CCASS Network (FinNet) 13
Derivatives Clearing and Settlement System (DCASS)
Integrated Clearing System for Futures and Stock Options
A Seamless Trading and Clearing Derivatives Platform
OM SECUR – Clearing OM Click - Trading 14
Common Risk Management System
Integrated Risk Profiles
Cross Product Assessment
Cross Participants Analysis
Real/Time Monitoring 15
Common Risk Management System
Common Collateral Pool
Multi-Currency Cash Non-Cash Securities
Consolidated Pay and Collect 16
Securities Markets STP The aim of STP is to reach finality of securities transactions within the required market time-frames in an automated market infrastructure.
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Securities Markets STP Why STP?
Settlement Risk Reduction
Settlement Cost Reduction
Market Efficiency How STP?
Information Exchange Standards (ISSO 15022)
Uniform Technology Infrastructures
Market Participants Cooperation 18
Q & A
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