Market infrastructure - Hong Kong
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)
HKSCC owns CCASS, a book-entry system for eligible securities listed on the SEHK. CCASS began its operation in 1992. In its capacity as the central depository, CCASS accepts eligible securities from participants for settlement and safe custody. CCASS facilities include a service counters hall and a physical vault with a capacity for over 15 million share certificates. Securities held in CCASS are in immobilised form but the investor has the option to hold the shares in physical form if available.
CSD (fixed income securities) - Central Money Markets Unit (CMU)
The HKMA established the CMU in 1990 to provide computerised clearing and settlement facilities for Exchange Fund Bills and Notes. In December 1993, the HKMA extended the service to other HKD debt securities. It offers an efficient, safe and convenient clearing and custodian system for HKD debt instruments. In December 1994, the CMU was linked to the international clearing systems Euroclear and Clearstream. This helps to promote Hong Kong dollar debt securities to overseas investors who can make use of this link to participate in the HKD debt market.
Regulatory structure
The Securities and Futures Commission (SFC)
The SFC was established on 01 May 1989, to promote user confidence in the efficiency and fairness of the securities and futures markets so as to support their continuing development, especially in relation to capital formation for the China region.
The SFC is an independent statutory body responsible for safeguarding market integrity, enforcement of securities and futures legislation, investor protection and in particular overseeing the operations of the HKEX and its subsidiaries – namely SEHK, HKFE and HKSCC.
As a result of the rationalisation of regulatory functions, the SFC became the primary regulator of exchange participants on 6 March 2000. The SFC is responsible for matters relating to the conduct of exchange participants, new investigations and disciplinary matters concerning disputes between exchange participants and their clients.
Hong Kong Monetary Authority (HKMA)
The Hong Kong Monetary Authority (HKMA) was established on 01 April 1993 by merging with the Office of the Exchange Fund and the Office of the Commissioner of Banking.
The objectives of HKMA are to maintain currency stability, within the framework of the linked exchange rate system, through sound management of the exchange fund, monetary policy operations and other means deemed necessary. The HKMA is responsible for promoting the safety and stability of the banking system through the regulation of banking business and the business of taking deposits, and the supervision of authorised institution; and also for promoting the efficiency, integrity and development of the financial system, particularly payment and settlement arrangements.
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)
The HKEx is the holding company of the Stock Exchange of Hong Kong (SEHK), Hong Kong Futures Exchange (HKFE) and Hong Kong Securities Clearing Company (HKSCC). The HKEX is responsible for the regulation of their markets and members.
The clearing houses, Hong Kong Securities Clearing Company (HKSCC), SEHK Options Clearing House (SEOCH), and HKFE Clearing Corporation (HKCC) are responsible for the settlement of transactions on the exchanges and for risk management.
The SEHK is the front-line regulator of listed companies except for takeovers, share purchases and privatisations.
The exchanges, SEHK and HKFE, are responsible for exchange and clearing house participants’ regulation in relation to management of business risks, market surveillance and the enforcement of their respective trading and clearing 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.