Published On: Fri, Oct 29th, 2010

HKEX Status Report on New Product and Market Development Initiatives

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 16 July 2010

Status on 15 October 2010

1.

Consultation Paper on Proposed Changes to Requirements for Qualified Property Acquisitions and Formation of Joint Ventures

Not included in this issue.

The consultation paper was published on 10 September 2010 and the deadline for replies is 12 November 2010. HKEx will analyse respondents’ comments and publish its consultation conclusions in due course.

2.

Consultation Paper on Proposed Changes to the Minimum Number of Shareholders for the Market Capitalisation/ Revenue Test

Not included in this issue.

The consultation paper was published on 10 September 2010 and the deadline for replies is 12 November 2010. HKEx will analyse respondents’ comments and publish its consultation conclusions in due course.

3.

Possible changes to the requirements for overseas companies seeking secondary listings in Hong Kong

Not included in this issue.

HKEx is considering changes to its requirements for overseas companies seeking secondary listings in Hong Kong to differentiate the requirements for primary and secondary listings as they are currently similar.

4.

Possible changes to the Code on Corporate Governance Practices in the Listing Rules

Not included in this issue.

HKEx expects to consult the market in the fourth quarter of 2010 on possible changes to the Code of Corporate Governance Practices in the Listing Rules. Proposals may include requiring listed companies to provide their directors with monthly updates on their business activities. Other potential proposals include requiring listed companies to have nomination and remuneration committees.

5.

Possible changes to the Listing Rules regarding debt securities

Not included in this issue.

HKEx expects to consult the market in the fourth quarter of 2010 on possible changes to streamline and simplify the Listing Rules regarding debt securities offered to professional investors only.

6.

Consultation on Acceptance of Mainland Accounting and Auditing Standards and Mainland Audit Firms for Mainland Incorporated Companies Listed in Hong Kong

The Securities and Futures Commission (SFC) and the Hong Kong Institute of Certified Public Accountants are working to finalise necessary arrangements for implementation of the proposals.

The timetable is subject to resolution of issues by the SFC on the implementation of the proposals.

7.

Consultation on the placing of shares at initial public offering (IPO) and pre-IPO investments

Not included in this issue.

HKEx issued interim guidance to the market on 13 October 2010 on pre-IPO investments and has commenced soft consultations with the market on the policy matter. HKEx expects to publish a consultation paper on the proposals in the first quarter of 2011.

8.

Reporting on environmental and sustainability issues

Not included in this issue.

HKEx has commenced soft consultations with listed issuers and professional associations on the matter. HKEx is considering whether, and if so, how it can encourage and educate listed companies to adopt meaningful reporting on environmental and sustainability issues.

9.

Consultation on Proposed Changes to Trading Hours

Not included in this issue.

The consultation paper was published on 17 September 2010 and the consultation period ends on 29 October 2010. HKEx will analyse respondents’ comments and publish its consultation conclusions in due course.

10.

Study on After-hours Futures and Options Trading

Not included in this issue.

HKEx is doing a study on the trading of futures and options after their current market close. After-hours futures and options trading would help improve execution efficiency and trading arrangements, which is one of the key initiatives in HKEx’s Strategic Plan 2010-2012.

11.

Exploration of New Financial Products/ Services and Review of Existing Products/Services

Volatility Index-related Products
HKEx and an index company have solicited comments from market participants regarding the volatility index calculation methodology and are working on adaptations relevant to the Hong Kong market.

HKEx is one of the organisers of a volatility seminar scheduled for 16 November 2010. HKEx expects a volatility index for its securities market to be introduced before the end of 2010.

Dividend Point Index Futures
HKEx is studying the feasibility of introducing futures contracts based on the HSI Dividend Point Index and HSCEI Dividend Point Index, which were introduced by Hang Seng Indexes Company Limited on 12 July to provide the market with indicators to track cash dividends from constituent stocks of the Hang Seng Index and the Hang Seng China Enterprises Index respectively. HKEx will make a further announcement if it decides to introduce futures contracts based on the dividend point indices.


HKEx plans to introduce
HSI Dividend Point Index Futures and HSCEI Dividend Point Index Futures on 1 November 2010, subject to regulatory approval.

12.

T+2 Finality for Stock Exchange Trades and Settlement Instructions

The consultation conclusions will be published in the third quarter this year.

The consultation conclusions were published on 13 August 2010. HKEx aims to implement a T+2 finality arrangement for CCASS money settlement by the third quarter of 2011.

13.

Consultation on a Scripless Securities Market

The consultation conclusions will be published in the third quarter this year.

The consultation conclusions were published on 21 September 2010. The SFC will consult the public in early 2011 on a new subsidiary legislation that will set out in more detail how the scripless environment and those that play a key role in that environment will be regulated. A scripless regime will be implemented in phases following the necessary legislative changes and when the market infrastructure, key operators and market participants are ready. The first phase of the scripless regime is expected to be implemented in late 2013.

14.

Automation of Stamp Duty Reporting and Payment

HKEx held three EP seminars on the subject in the last week of April with a total of 627 attendees. All 465 trading EPs confirmed that they would complete any system and operational changes they needed to make before the end of July. HKEx plans to organise practice sessions and a market rehearsal in August for EPs’ staff to familiarise themselves with the new stamp duty arrangement. The automation is scheduled to be implemented in September subject to market readiness.

Automated stamp duty reporting and payment were introduced on 20 September 2010.

15.

Derivatives Market System Capacity and Technology Upgrade

The capacity and technology upgrade of HKATS and DCASS is making good progress. The plan is to roll out the platform and infrastructure upgradePhase 1by the fourth quarter this year to increase the order capacity of HKATS to 21,000 order book changes/second (OBC/S) from the original of 8,100 OBC/S. The design of the DCASS software will be enhanced in Phase 2 and rolled out in mid-2011.

The project is progressing as planned. The Phase 1 rollout was launched on 18 October 2010.

16. Securities Market System Capacity and Technology Upgrade (also known as AMS/3.8 and MDS/3.8)

This project aims for 10-fold improvement over the existing securities trading system capacity to achieve an initial capacity of 30,000 orders per second (scalable to 150,000 orders per second if necessary), as well as an average order processing latency of nine milliseconds, to deliver significant advancement in the capacity and performance of the securities market infrastructure.

An exposure paper will be published for Exchange Participants and information vendors at the end of the third quarter of this year for their planning and preparation.

The project plan calls for implementation by the end of 2011.

HKEx published its Information Paper On AMS/3.8 & MDS/3.8 System Upgrades on 8 October 2010. HKEx expects the upgrades to be completed by the end of 2011.

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