Clear Talk Issue 40
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Latest News on Investor Account Service ClearTalk Clear Talk is the information bulletin of Hong Kong Securities Clearing Company Limited. All contributions, enquiries, letters to the editor, and any other items of interest are most welcome and should be addressed to: The Ed itor, Clear Talk c/o Corporate Communications Department Hong Kong Securities Clearing Company Limited 12/ F Chinachem Exchange Square 1 Hoi Wan Street, Quarry Bay Hong Kong For any enquiries regarding rontent of such contributions, please contact Betty Chan, Assistant Director, Corporate Communications Department. Telephone: 2597-0870 Fa x: 2579-0075 Website address: http://www.hkclearing.com.hk Clear Talk is intended to provide a forum for discussing matters of concern to our readers. While it aims to provide infomlation, the rights and obligations of participants are governed by th e General Rules of CCASS and CCASS Operational Procedures. No responsibilities fo r any loss arising to any person relying upon the inforrnatior contained in this publication shall be accepted by Ho1 Kong Securities Clearing Company Limited. '--' Following the announcement of HKEC's board of directors will be a the securities and futures market decision making body shaping the reform by the Financial Secretary company's policies and will be in March 1999, the Government chaired by a non-executive released its proposal on 8 July 1999 Chairman. Leadership of the in relation to the demutualisation company will come from the and merger of the two exchanges Chairman, the Chief Executive and three clearing houses under a Officer and the Chief Operating new holding company, the Hong Officer. HKEC will have five wholly Kong Exchanges and Clearing owned subsidiaries or business units v mited (HKEC). (BUs), responsible for Cash Products, Derivative Products, Information on co-ordination among BUs and A commercial business structure Services, Information Technology, and between BUs and functions. According to the paper "Hong Kong Clearing and Settlement respectively. Exchanges and Clearing Limited: Checks and balances for Reinforcing Hong Kong's Position as The company's daily management public interests a Global Financial Centre" published responsibilities will be carried out Besides the current regulation over by the Government, HKEC will be a by two leadership committees, exchanges and clearing houses commercial organisation that is namely the Executive Committee provided for under the various performance oriented and profit and the Management Committee. securities-related ordinances, specific driven, with the aim of enhancing The Executive Committee will measures are proposed to prevent services to investors, issuers and review key issues related to HKEC's monopolistic abuses by HKEC. The intermediaries and seeking strategic strategies and operations for Securities and Futures Commission alliances with global partners to submissions to board, and the (SFC) will also have approval authority ensure competitiveness. Management Committee will focus over the fees that HKEC charges. Hong Kong Bond Market EXCHANGE FUND NOTES TO BE U D The Stock Exchange of Hong Kong (Stock Exchange) signed a Listing Agreement for Exchange Fund Notes (EFN) with the Hong Kong Monetary Authority (HKMA) on 19 July 1999. Hongkong Clearing also signed an agreement with the HKMA to admit EFN as eligible securities in CCASS. Picture shows (from left) Stewart Shing, Chief Executive of Hongkong EFN will be listed on the Stock Exchange on 16 August. Clearing; John Chan, Chairman of Hongkong Clearing; Alec Tsui, Chief Executive of the Stock Exchange; Lee Hon Chiu, Chairman of the Stock Trades executed on the Stock Exchange will be settled Exchange; Joseph Yam, Chief Executive of HKMA and Tony Latter, Deputy through CCASS. Chief Executive of HKMA during the toasting at the signing ceremony. Given the importance of the integrated decision making process of HKEC, the derivatives markets after two years of clearing and settlement unit under Government will appoint eight its inception. Meanwhile, access to the HKEC in safeguarding the integrity directors to the 15-member inaugural markets may be obtained through and stability of Hong Kong's financial board in March 2000 and not less than acquisition of trading rights from system, the policy making function for five to the second board of HKEC, existing members of the exchanges. the clearing unit will be entrusted to a which will have a total of 12 to 15 high power, independent governance directors, in 2003. Market regulation committee within HKEC. It is to On the regulation of intermediaries, ensure that HKEC will perform its risk Access to HKEC markets it is proposed that all prudential management function in a prudent In the proposed business model, regulation of exchange users will be manner and that risk-management ownership of the exchanges and handled by the SFC. This includes related decisions will not be affected access to their trading facilities monitoring compliance with liquid by profit-related considerations. would be separated. Ownership in capital requirements and ensuring the form of shares in HKEC could that exchange users have in place A shareholding limit of 5% will be freely traded in the market, proper systems of management and also be put down in the law to whereas the trading rights will control. HKEC, on the other hand, prevent control of HKEC by any have to be acquired separately. will monitor particular aspects of t1, 0 individual parties or parties acting Current members of the two business of exchange users so as'-.-d' in concert. In addition, any exchanges will be automatically assess and manage the risks inherent changes in the corporate structure granted the rights to trade in the in the operations of its subsidiary involving changes in the equity respective markets and products business units. This would involve ownership of HKEC's subsidiaries of HKEC that are the same as those adequacy of risk management will require the approval of the they currently have. measures and compliance with SFC in consultation with the exchange trading rules. Financial Secretary. Access to the exchanges will be broadened gradually. It is proposed Current members of the two exchanges To ensure that wider public and market that HKEC may begin to offer new are to vote on the demutualisation and interests will also be represented in the trading rights to its cash and merger in September this year. John Chan, Chairman of Hongkong Chee Hwa, gave awards to 260 people in this Clearing, and Peter Wong, Deputy Chairman, year's Honours List which was published in have been awarded the Gold Bauhinia Star the Government Gazette on 1 July. There (GBS) by the Government of the Hong Kong were 5 Grand Bauhinia Medal Awards, 17 Special Administrative Region (HKSAR). Gold Bauhinia Star Awards, 26 Silver Bauhinia Star Awards and 212 other awards. Mr Chan was awarded the GBS for his outstanding public and community service and significant contribution to the development of the securities market in Hong Kong. Mr Wong received the GBS for his long-standing commitment to public service and valuable contribution to the development of the Open University of Hong Kong. The Chief Executive of the HKSAR, Tung John Chan Peter Wong Areas for Objectives examination 1. Inventory & * To ensure all CCASS related system software, application impact analysis systems and computer related equipment were included in the inventory and impact analysis with compliance status and solution properly _identified 2. Time-machine * To ensure the time-machine was properly set up to provide a set UJ> reliable environment and a proficient platform for Y2K testing DOUBLE 3. CCASS and major * To verify the Y2K compliance status of these proclaimed internal systems compliant systems CONFIDENCE 4. Interface tests with * To ensure that CCASS can interface with its business partners' business partners systems during and after the century rollover IN CCASS 5. Street-wide tests * To ensure the street-wide tests were well planned, prepared and conducted to fa cilitate the participants in testing their back office YEAR2000 systems * To ensure full partici pation in the tests with exceptions timely COMPLIANCE followed up 6. Contingency plan * To ensure the contingency plan was well planned and formulated by taking into account internal and external risky Y2K failure view of the potential adverse effect of scenarios the millenium bug, Hongkong Clearing's Internal Audit Departmen t has been * To ensure the contingency plan was reasonably tested to maintain carrying out a comprehensive internal core operations and services during disastrous situations a udit since early 1997. The a udit w as 7. Preserving Y2K * To ensure policies and procedures are in place to prevent the scheduled to be completed in 2000 aft er the introduction of non-compliant components, through new overall project evaluation. equipment acquisitions, software and hardware upgrade or program change, into the Y2K compliant environment The audit aims at examining each of the Y2K * To ensure checking procedures are adequate in verifying data initiatives independently and p roviding integrity and system functions before the systems go live on the assurances to the general public, regulatory first working day of the new millennium bodies and the Government regarding the Company's Y2K compliance status. Internal As a result of examining the critical initiatives, independently. In the third street-wide test Audit's participation forms an integral part seven audit papers have been issued with held in June 1999, the auditors simulated of the corporate endeavor in Y2K. recommendations for immediate follow-up or themselves as CCASS Participants and input rectification by relevant departments. self-designed trade data and conditions to test Scope certain key CCASS functions. Error data were CCASS Acceptance Test also intentionally input to test the system As CCASS is Y2K compliant by design, the response u nder the Y2K environment. No audit scope has been focused on testing the The Internal Audit Department closely exceptions were detected and results of the test proclaimed compliant systems independently monitored the CCASS Acceptance Test.