Market infrastructure - Hong Kong

07.10.2011

Institutions and organisation

The Stock Exchange of Hong Kong (SEHK)

Incorporated in Hong Kong under the Companies Ordinance as a limited company in 1980, SEHK began operations in 1986, replacing the previous four separate exchanges. In 2000, it became a wholly owned subsidiary of Hong Kong Exchanges and Clearing Ltd. Recognised as an exchange controller under the Securities and Futures Ordinance (SFO), it has the exclusive right to establish, operate and maintain a stock market in Hong Kong.

Hong Kong Securities Clearing Company (HKSCC)

HKSCC is a recognised clearing house under SFO and is responsible for the development and operation of the Central Clearing and Settlement System (CCASS) for listed securities in Hong Kong and for the regulation of CCASS participants.

Central Bank - Hong Kong Monetary Authority (HKMA)

Established in 1993, HKMA is a statutory body and is the de-facto central bank of Hong Kong, whose main functions are to maintain the stability of the banking system and to ensure the efficiency of the monetary system. HKMA also performs the role of a central custodian and clearing agent for debt instruments denominated in HKD and in other currencies issued by private sector issuers through the Central Money Markets Unit (CMU) service.

CSD (equities) - Central Clearing and Settlement System (CCASS)

Operated by HKSCC, CCASS provides settlement services where securities are credited or debited to participants accounts and funds are recorded in the participants’ money ledgers on settlement date.

CSD (fixed income securities) - Central Money Markets Unit (CMU)

Operated by HKMA, CMU provides a computerised clearing and settlement facility for Exchange Fund Paper and other private debt securities offering a safe, efficient and convenient clearing and custodial system for Hong Kong debt instruments.

Regulatory structure

The Securities and Futures Commission (SFC)

Established in May 1989 as an independent statutory regulatory body outside the Civil Service, SFC is the principal regulator of the Hong Kong securities and futures markets.

SFC supervises the following participants:

  • Exchange companies;
  • Clearing houses;
  • Securities dealers;
  • Investment advisers;
  • Securities subsidiaries of banks.

SFC is responsible for administering the laws governing the securities and futures markets in Hong Kong and facilitating and encouraging the development of the markets.

The regulatory objectives of SFC with regard to the securities and futures industry are to:

  • Maintain and promote fairness, efficiency, competitiveness, transparency and orderliness;
  • Promote the public understanding of its operation and functioning;
  • Provide protection for members of the public investing in and holding financial products;
  • Minimise crime and misconduct;
  • Reduce systemic risks;
  • Assist the Financial Secretary in maintaining the financial stability of Hong Kong by taking appropriate steps.

As the enforcer of legislation for the securities and futures market, SFC has the power to suspend or revoke licenses and impose fines or take legal action against market participants.

Hong Kong Monetary Authority (HKMA)

The main functions of HKMA are to:

  • Ensure the stability of the HKD;
  • Manage the exchange fund (Hong Kong’s official reserves);
  • Promote the safety of Hong Kong’s banking system;
  • Develop Hong Kong’s financial infrastructure to enable money to flow smoothly, freely and without obstruction.

The Financial Services and the Treasury Bureau (FSTB)

FSTB is a government body whose objective is to further the development of SAR (the Special Administrative Region of the People’s Republic of China) as a major international financial centre.

It provides an appropriate legal, regulatory and administrative framework to maintain the stability of the monetary system and promotes the highest standards of business ethics and integrity so that all market participants can compete on equal terms.

It also aims to foster the development of new financial products and services to facilitate the sound and efficient operation of business and to enable Hong Kong to compete effectively with other major financial centres.

The Hong Kong Exchanges and Clearing Ltd. (HKEx)

HKEx is a recognised exchange controller under SFO. It owns and operates the stock exchange and the futures exchange and their related clearing houses: (HKSCC), HKFE Clearing Corporation Ltd. and the SEHK Options Clearing House Ltd. (SEOCH).

As a listed company, the HKEx is itself also subject to SFC rules.

Hong Kong Securities Clearing Company Ltd. (HKSCC)

HKSCC is a recognised clearing house under SFO and is a wholly owned subsidiary of HKEx.

The HKSCC is responsible for the development and operation of a Central Clearing and Settlement System (CCASS) for listed securities and the regulation of CCASS participants. Its mission is to reduce risk and cost and to improve the efficiency of post-trade processing.

The Hong Kong Association of Banks (HKAB)

HKAB is a statutory body and acts as governing body for the conduct of banking business. All licensed banks are required to become and remain members of the association and are subject to its rules.