1. Asian Financial Services Technology Conference Exchanges & Technology
Lawrence Fok
Deputy Chief Operating Officer
Hong Kong Exchanges & Clearing Limited
11 September 2001

2. Macro Factors Reshaping the Global Financial Market
Globalisation
Technological advances

3. 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

4. The New Financial Landscape (cont.)
Issuers’ preference
the most liquid market
the largest pool of investors
competitive compliance costs
a level playing field

5. 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

6. 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

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

8. 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

9. SCEFI Recommendations
Initiatives Objectives
Build Securities and Derivatives Provide the Foundation for Implementation of Network (SDNet) Interactive/Message-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

10. 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

11. Target Clearing Infrastructure
Product Specific Clearing Processing
CCASS for Securities
DCASS for Derivatives

12. CCASS Upgrade Project (CCASS/3) Features
Functional Architecture Upgrade
Multi-Market Structure
Variable Settlement Cycles (T+x)
Extended Trading Hours

13. CCASS Upgrade Project (CCASS/3) Features
Technical Architecture Upgrade
Database Segmentation
Middle-Tier
User Access Options
Browser
API
SWIFT (GSTPA)
New CCASS Network (FinNet)

14. 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

15. Common Risk Management System
Integrated Risk Profiles
Cross Product Assessment
Cross Participants Analysis
Real/Time Monitoring

16. Common Risk Management System
Common Collateral Pool
Multi-Currency Cash
Non-Cash Securities
Consolidated Pay and Collect

17. 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.

18. 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

19. Q & A