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Annual Review : Achievements and New Initiatives. Paul Chow Chief Executive, Hong Kong Exchanges and Clearing Limited 12 January 2007. Agenda. New Records Set in 2006 Major Achievements in 2006 New 2007-2009 Strategic Plan Selected Key Initiatives in 2007 Conclusion.

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Annual Review : Achievements and New Initiatives

Paul Chow

Chief Executive, Hong Kong Exchanges and Clearing Limited

12 January 2007


Agenda
Agenda

  • New Records Set in 2006

  • Major Achievements in 2006

  • New 2007-2009 Strategic Plan

  • Selected Key Initiatives in 2007

  • Conclusion


New records set in 2006 in the securities market
New Records Set in 2006In the Securities Market

2006(up to year-end)

HK$

Pre-2006 Record

$13,339.9 bil

$8,376.3 bil

$1,082 bil

$2,536.6 bil

$1,790.1 bil

$333.2 bil

$291.8 bil$124.9 bil

$505.9 bil

2,823

(28 Dec 2006)

(Nov 2006)

$8,260.3 bil

$4,520.4 bil

$637 bil

$953.3 bil

$856.6 bil

$165.7 bil

$137.4 bil$71.6 bil

$467.3 bil

1,682

(21 Dec 2005)

(Year 2005)

(Aug 1997)

(Year 2005)

(Year 2005)

(Year 2005)

(Year 2005) (Year 2005)

(Year 2000)

(Year 2005)

Market Capitalisation#

Total Market Turnover

Other Turnover Records

Single-month Turnover

H shares

Derivative Warrants

Funds Raised by Initial Public Offers

Total

H shares

Largest IPO

^

Total Equity Capital Raised

^

Number of Newly Listed Derivative Warrants

#The figures represent the total market capitalisation of all equity securities listed on the Main Board and Growth Enterprise Market (GEM)and exclude other listed securities such as REITsand government bonds. Trading only stocks under pilot programmes arealso excluded.

^ The figure excludes funds raised by REITs, which are classified as Unit Trusts.


New records set in 2006 in the derivatives market
New Records Set in 2006In the Derivatives Market

Volume

Number of Contracts in 2006

(Up to year-end)

Pre-2006 Record

(Contracts)

Total Futures and Options

25,523,007

13,433,386

12,089,621

9,910,565

8,722,393

(Year 2005)

(Year 2005)

(Year 2005)

(Year 2005)

(Year 2005)

42,905,915

19,863,299

23,042,616

12,718,380

18,127,353

Total Futures

Total Options

Hang Seng Index Futures

Stock Options


Major achievements in 2006
Major Achievements in 2006

Listing

  • Changes to composition and structure of Listing Committee

  • Successful appeal in New World Judicial Review

  • Formulation of proposals for GEM

  • Establishment of Mainland China Affairs Team

  • Preparations for abolition of paid announcements including enhancements to issuer information on HKEx website

  • Simultaneous dual-listing of A and H shares

  • Development of proposals to facilitate listing of overseas issuers

  • Support for establishment of Financial Reporting Council


Major achievements in 2006 cont d
Major Achievements in 2006 (cont’d)

Trading

  • Opening of renovated Trading Hall and new Exhibition Hall

  • Rollout of more long-dated index options and more futures and options on Mainland related stocks

  • Revamp of stock options market and adjustment of position limits and reporting level for stock options

  • Review of derivative warrant market and launch of DWRC

  • Rollout of CBBC market and expansion of underlying stocks for CBBC

  • Trading spread reduction

  • CFTC no-action relief for futures contracts on HSCEI and FXC

  • Review of market maker model for HKFE products


Major achievements in 2006 cont d1
Major Achievements in 2006 (cont’d)

Clearing

  • Elimination of scrip fee assessed on deemed book close dates

  • Admission of Mainland institution and Macau investors as Investor Participants in CCASS

  • Rollout of five-day clearing week

  • Enhancement of Stock Segregated Account with Statement service: first phase

  • Management of broker defaults with no loss to clearing houses

    Business Development

  • Continue to actively promote Hong Kong market in the Mainland and non-Mainland markets


Major achievements in 2006 cont d2
Major Achievements in 2006 (cont’d)

Information Technology

  • Upgrade of trading devices, LAN cabling infrastructure and other facilities in Trading Hall

  • Upgrade of hardware and software of AMS/3 Open Gateway and MWS

  • Upgrade of the HKATS/DCASS system backbone infrastructure

  • Upgrade of capacity of HKATS, DCASS and PRS and software of HKATS Network Gateways

  • Migration of CCASS/3 and MDF circuits to SDNet as scheduled

  • Upgrade of the capacity of HKEx website

  • Redevelopment of most derivatives risk management satellite PC systems

  • Implementation of Finance MIS and Participants MIS systems


Major achievements in 2006 cont d3
Major Achievements in 2006 (cont’d)

Corporate

  • Formulation of HKEx Strategic Plan 2007-2009

  • Implementation of new remuneration structure and policies

  • Completion of FSTB-led Financial Sector Market Wide Rehearsal Exercise

  • 2006 HKMA Best Annual Reports Awards Gold Prize (General Category)

  • Citation for Achievement in Corporate Governance Disclosure (General Category) from HKMA

  • HKICPA Best Corporate Governance Disclosure Awards 2006 - Platinum Award in Non-Hang Seng Index Category


Strategic plan 2007 2009 driven by a new mission

Mission 2004-06

“To operate a world-class marketplace for Hong Kong and Mainland China securities and derivatives products.”

Mission 2007-09

“To be a leading international marketplace for securities and derivatives products focused on

Hong Kong, Mainland China and the rest of Asia.”

Strategic Plan 2007-2009 – Driven by a New Mission


Strategic plan 2007 2009 the three themes
Strategic Plan 2007-2009 – The Three Themes

Themes

Meaning

Implications

Mainland Positioning

  • China’s international exchange

  • Complements Mainland exchanges

  • Partners Mainland

  • RMB products

  • A:H shares

  • Mutual transparency (eg share price display)

  • Mainland intermediaries

  • Mainland investors (QDII)

  • Seeking new customers

  • Seeking more business from existing customers

  • Overseas issuers and intermediaries

  • Commodity and climate products

  • Asian focus

  • New Cash and Derivatives products

Business Expansion

Service Improvement

  • Service mentality

  • Cost-effectiveness

  • Focus on customers

  • Transparency and speed

  • Service culture

  • MIS – finance and customer

  • Internal efficiency/automation

  • Accountability and organisation structure

  • Compensation linked to service / performance


Trading
Trading

Selected Key Initiatives in 2007

  • Review market operations after implementation of reduction of trading spreads for securities trading between $2 and $20

  • Implement revised market maker model for HKFE products

  • Introduce tender service for sale and purchase of Trading Rights

  • Study further Mainland-related and RMB-denominated products

  • Explore new product and service areas

  • Address barriers to securities and derivatives market trading


Selected Key Initiatives in 2007 (cont’d)

Listing

  • Consult on proposals for GEM

  • Support SFC/Government in implementing “statutory backing”

  • Publish transparency statement to facilitate equity listing regime for a greater range of overseas issuers

  • Implement No-Paid-Ad initiative

  • Improve internal efficiency and effectiveness in compliance, monitoring and enforcement


Selected Key Initiatives in 2007 (cont’d)

Clearing

  • Further enhance the Stock Segregated Account with Statement service (second phase) and the Investor Participant service

  • Further improve CCASS nominee services and review electronic voting

  • Introduce Third Party Clearing to strengthen the securities market infrastructure

  • Review clearing risk management policies and arrangements


Selected Key Initiatives in 2007 (cont’d)

IT

  • Implement AMS/3 enhancements

  • Implement last phase of network consolidation (AMS/3)

  • Replace and upgrade CCASS/3 Mainframe System

  • Replace and upgrade CCASS Middle-Tier System

  • Upgrade HKATS/DCASS to Release 19.x

  • Conduct derivatives market system capacity planning and upgrade

  • Explore consolidation of data centres

  • Review HKEx IT systems for possible efficiency improvement


Selected Key Initiatives in 2007 (cont’d)

Business Development

  • Continue to organise listing promotion events

  • Continue to provide training programmes for issuers

    Corporate

  • Review fee structure

  • Work towards consolidation of HKEx offices

  • Review HKEx organisation structure and resource deployment

  • Strengthen HKEx accountability regime

  • Further develop HKEx MIS – finance and customer



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