Download HK`s formula for developing public confidence in exchanges

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HK's formula for developing public confidence in exchanges
Friday, June 3, 2005
The Secretary for Financial Services and the Treasury, Mr Frederick Ma,
today (June 3) shared with participants of an international forum in Beijing
Hong Kong's formula for successfully building public confidence in stock
exchanges, which is crucial to the development of exchanges.
Speaking at the World Federation of Exchanges Forum for Developing
Markets, Mr Ma said the formula Hong Kong adopted was to develop and
strengthen confidence in the efforts of Government, the statutory regulator and
the exchange itself as well as other law enforcement agencies.
Mr Ma pointed out that Hong Kong had a three-tiered structure for the
regulation of the securities and futures industry - the Government, the
Securities and Futures Commission (SFC) as the statutory regulator; and the
Hong Kong Exchanges and Clearing Limited (HKEx) as a market operator and
frontline regulator.
Noting that the primary role of the Government was to provide a favourable
environment under which the financial markets could develop and prosper, Mr
Ma said the Government's policy was to maintain and further upgrade the
quality of financial markets so as to protect investor interest and thus
strengthen investor confidence.
"To this end, we have made tremendous efforts to establish a world-class
regulatory framework and foster strong corporate governance," Mr Ma said.
The second tier, the SFC as the statutory regulator, is independent from the
Government and has its own governing body and statutory powers with checks
and balances provided under the law, Mr Ma pointed out.
Noting that the SFC had the statutory responsibility to supervise and
regulate activities carried out by the exchanges to ensure the markets were
orderly, informed and fair, Mr Ma said: "Public confidence in the statutory
regulator's ability in promoting an orderly market and monitoring exchanges
depends not only on the strength of its 'regulatory teeth', but also the
transparency and accountability of the regulator."
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As to the third tier - the HKEx - Mr Ma said it had done an excellent job in
providing orderly and fair markets for the trading of securities and futures,
putting in place systems to manage risk prudently, and providing reliable
infrastructure. It also had well-established systems to ensure accountability,
transparency and avoidance of conflicts of interest as well as its determination
to maintain high market quality in the execution of its listing functions.
On top of the three-tiered regulatory structure, Mr Ma said the excellent
work of other law enforcement agencies had added credibility to Hong Kong's
regime. The Police and the Independent Commission Against Corruption
worked closely with the SFC in taking enforcement action against corporate
misconduct.
With the concerted efforts of the Government, the statutory regulator, the
exchange and other law enforcement agencies, Hong Kong's exchanges had
gained confidence from not only local investors, but also investors from around
the world, Mr Ma said.
"Certainly, we can't be complacent and must keep up with our efforts in
enhancing our market quality and strengthening investor confidence in our
exchanges," Mr Ma said.
Besides taking part in the forum, Mr Ma also met during his stay in Beijing
with Mainland officials, including the Governor of the People's Bank of China,
Mr Zhou Xiaochuan; Chairman of the National Social Security Fund, Mr Xiang
Huaicheng; Vice Minister of Finance, Mr Lou Jiwei; and Administrator of
State Administration of Foreign Exchange, Ms Hu Xiaolian.
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