Asian Financial Services Technology Conference Exchanges

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Asian Financial Services Technology
ConferenceExchanges Technology

• Lawrence Fok
• Deputy Chief Operating Officer
• Hong Kong Exchanges Clearing Limited
• 11 September 2001

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Macro Factors Reshaping the Global Financial
Market

• Globalisation
• Technological advances

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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

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The New Financial Landscape (cont.)
Issuers preference

• the most liquid market
• the largest pool of investors
• competitive compliance costs
• a level playing field

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Market Reforms for Hong Kong 1999/2000 Budget
Speech of the Financial Secretary

• Demutualisation and Merger of Hong Kongs
  Exchanges and Clearing Houses
• Enhancement of the Market Infrastructure

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• 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

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Cardinal Principle

• To act in the interest of the public, having
  particular regard to the interests of the
  investing public.
• - Merger Ordinance -

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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

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SCEFI Recommendations
Initiatives Objectives Build Securities and
Derivatives Provide the Foundation for
Implementation of Network (SDNet) Interactive/Me
ssage-based Interfaces and Web-enabled Access,
and Eventual Consolidation of All Trading and
Clearing Networks Upgrade Securities Clearing
to Upgrade CCASS Architecture to Enable Message-
Open Architecture Ready based Interface,
Gateway and Open Access Achieve Single Clearing
Arrangement Implement Single Clearing Arrangement
Building Blocks, such as Consolidated Clearing
Account Structure, Unified Money Settlement,
Portfolio- based Risk Management Enable Straight
Through Processing Implement the Straight Through
Processing Building Blocks, such as TFM, TRS,
CBI Consolidate Derivatives Clearing Provide A
Single Clearing Platform for Derivatives Into A
Single Platform Products Realise Scripless
Securities Market Convert Hong Kong To A
Scripless Securities Market
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Post Merger Systems Infrastructure
(2000) Trading Clearing Securities AMS/3
(N) CCASS Stock Options TOPS TOPS Futures HKATS
(N) OCC
Derivatives Trading Integration (August 2001)
Trading Clearing Securities AMS/3 CCASS Stock
Options HKATS TOPS Futures HKATS OCC
Derivatives Clearing Integration (2002)
Trading Clearing Securities AMS/3 CCASS/3
(N) Stock Options Futures HKATS DCASS (N) (N)
new or upgrade
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Target Clearing Infrastructure

• Product Specific Clearing Processing
• CCASS for Securities
• DCASS for Derivatives

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CCASS Upgrade Project (CCASS/3) Features
Functional Architecture Upgrade

• Multi-Market Structure
• Variable Settlement Cycles (Tx)
• Extended Trading Hours

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CCASS Upgrade Project (CCASS/3) Features
Technical Architecture Upgrade

• Database Segmentation
• Middle-Tier
• User Access Options
• Browser
• API
• SWIFT (GSTPA)
• New CCASS Network (FinNet)

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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

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Common Risk Management System

• Integrated Risk Profiles
• Cross Product Assessment
• Cross Participants Analysis
• Real/Time Monitoring

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Common Risk Management System

• Common Collateral Pool
• Multi-Currency Cash
• Non-Cash Securities
• Consolidated Pay and Collect

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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

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Q A