Title: Consultation Conclusions on a Proposed Operational Model for a Scripless Securities Market
1Consultation Conclusions on a Proposed
Operational Model for a Scripless Securities
Market
Mr. Stewart Shing Executive Vice President and
Head of Clearing Division Hong Kong Exchanges and
Clearing Limited
31 May 2004
2Contents
- Purpose of Consultation Conclusions
- Consultation Results
-
- HKEx Responses
-
- The Issuer Register Model
- Progressive Approach on Implementation
- Implications for the Market
- Conclusions and Proposed Way Forward
3Purpose of the Consultation Conclusions
- HKEx published a Consultation Paper on 24 October
2003 - The Consultation Conclusions summarised
- Comments received
- HKEx responses
- HKEx recommendation
- Way forward for scripless initiative in Hong Kong
4Consultation Results (1/3)
Others are an individual and an anonymous
respondents
Total 26 Submissions
5Consultation Results (2/3)
- Supportive of the scripless initiative in
principle - Nearly half of the respondents
- Concerns over certain features of the originally
proposed model - Fragmentation of the Register Of Members (ROM)
- Removal of the immediate credit policy
- Registrar Participantship
- Shareholder Reference Number (SRN)
6Consultation Results (3/3)
- Other concerns
- Cost implications
- Timing of implementation
7HKEx Responses (1/3)
- The Split Register Model originally proposed
- Feasible and generally sound
- Modifications desirable in response to market
concerns
8HKEx Responses (2/3)
- On fragmentation of ROM/removal of immediate
credit - CCASS not as a sub-register and maintained on a
nominee basis - Issuer Register Model
9HKEx Responses (3/3)
- On Registrar Participantship
- Coordination in form of agreement
- Open to other suggestions
- On SRN
- Currently under review by Federation of Share
Registrars - On cost and timing
- Progressive Approach
10The Issuer Register Model
Registrars
HKSCC
ROM (Issuer Register)
HKSCC Nominees
Uncertificated Shareholders
Certificated Shareholders
Investor Participants
CCASS Participants
HKSCC Nominees will dematerialise part of its
shareholdings and also become an uncertificated
shareholder, in addition to being a certificated
shareholder, on the Issuer Register
Excluding Investor Participants Details of the
beneficiary owners are kept by CCASS Participants
Omnibus Client Account
Stock Segregated Accounts with Statements
- Boundary of ROM
- Person/institution/account
- Register of Members (ROM)
- Names on ROM
11Key Features (1/3)
- Dematerialisation
- Optional
- Investors may continue to hold certificates
12Key Features (2/3)
- Share Registrars
- Roles and functions largely the same
- The Issuer Register maintained
- ROM
- One for each listed company
- Shareholdings
- certificated shareholdings
- uncertificated shareholdings
-
13Key Features (3/3)
- CCASS
- Clearing and settlement operations largely the
same - Immediate credit maintained
- Not as a sub-register
14Progressive Approach on Implementation
- Initial Phase
- Dematerialisation programme
- Starting with CCASS Depository
- Further Development
- Electronic linkage between CCASS and individual
share registrars - For deposits and withdrawals of uncertificated
shares
15Initial Phase (1/5)
- CCASS Depository (1/4)
- Dematerialisation (i)
- Locally incorporated Hong Kong-listed companies
- 1.6 million certificates (16 of market cap.)
- Jumbo and odd lots
- 550,000 certificates (15 of market cap.)
16Initial Phase (2/5)
- CCASS Depository (2/4)
- Dematerialisation (ii)
- Overseas incorporated Hong Kong-listed companies
- 4.4 million certificates (18 of market cap.)
- Depending on overseas jurisdictions
17Initial Phase (3/5)
- CCASS Depository (3/4)
- Share deposits and withdrawals by Participants
- Physical scrip accepted
18Initial Phase (4/5)
- CCASS Depository (4/4)
- HKSCC Nominees
- Shareholding information of CCASS Participants
(except for Investor Participants) - Available to public subject to a fee
19Initial Phase (5/5)
- Market intermediaries and investing public
- As an option when share registrars ready
20Further Development
- Main enhancement
- Electronic linkage
- Between CCASS and individual share registrars
- Other enhancements
- Depending on market needs
21Implications for the Market (1/2)
-
- Minimal impact on operations for market
intermediaries - Limited changes to market structure
- Minimal up-front development costs
- Share registrars/CCASS
- System changes
- Electronic linkage
22Implications for the Market (2/2)
-
- Dematerialisation fee
- To be determined by share registrars in
consultation with SFC - CCASS fees
- To be reviewed in consultation with SFC
23Conclusions and Proposed way Forward (1/8)
- Conclusions (1/4)
- Removal of scrip is an important and unavoidable
development - Higher efficiency
- Lower costs
- More shareholder transparency
24Conclusions and Proposed way Forward (2/8)
- Conclusions (2/4)
- Issuer Register Model largely the same as
currently - One ROM for each listed company
- Immediate credit policy maintained
- Certificated and uncertificated shareholdings
25Conclusions and Proposed way Forward (3/8)
- Conclusions (3/4)
- A progressive approach allowing
- Investing public and market participants
- Time to get used to the scripless environment
- Market forces to determine pace for further
development
26Conclusions and Proposed way Forward (4/8)
- Conclusions (4/4)
- Market perception
- Issuer Register Model workable and acceptable
- Federation of Share registrars
- Consumer Council
- Brokers associations
- CCASS Custodian Participants
- Support to take the proposal forward
- SFC
27Conclusions and Proposed way Forward (5/8)
- Proposed Way Forward (1/4)
- Enabling legislation
- Introduction to legislature in the next
legislative session - Dematerialisation of CCASS Depository
- 550,000 jumbo and odd lots certificates
- 12 to 18 months after legislation
28Conclusions and Proposed way Forward (6/8)
- Proposed Way Forward (2/4)
- Continue discussions with SFC and Federation of
Share Registrars - Electronic linkage
- Handling of overseas incorporated Hong
Kong-listed shares - Dematerialisation fee
- CCASS fee review
29Conclusions and Proposed way Forward (7/8)
- Proposed Way Forward (3/4)
- Working closely with SFC and other stakeholders
- Investor education
30Conclusions and Proposed way Forward (8/8)
- Proposed Way Forward (4/4)
- Goals with the scripless initiative
- To gain general market support
- To serve as basis for Hong Kong to move forward
31COMPLIMENTS
- Respondents to the HKEx Consultation Paper
- The following groups which gave comments in the
discussion of the Issuer Register Model and the
implementation approach - SFC
- Federation of Share Registrars,
- Consumer Council
- Brokerage community
- CCASS Participants
32THANK YOU