Hong Kong Exchanges and Clearing

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Hong Kong Exchanges and Clearing Limited
Company typePublic company
IndustryFinancial Services
Founded2000
Headquarters
Exchange Square, Central
,
Hong Kong
Key people
Ronald Arculli (Chairman), Charles Li (CEO)
ServicesShares, futures & options Trading
DivisionsHong Kong Stock Exchange, Hong Kong Futures Exchange, Hong Kong Securities Clearing Company
Websitehkex.com.hk
Exchange Hall

Hong Kong Exchanges and Clearing Limited (Chinese: 香港交易及結算所有限公司), also 香港交易所 or 港交所; abbreviated as HKEx; SEHK: 388) is the holding company for The Stock Exchange of Hong Kong Limited (SEHK), Hong Kong Futures Exchange Limited (HKFE) and Hong Kong Securities Clearing Company Limited. With a total market capitalisation of over US$2.124 trillion as of 12 July 2007, the HKEx ranked fifth in the world at the time by market capitalisation of listed companies (see List of stock exchanges for complete rankings). As of December 31, 2010 it ranked sixth in market capitalization.

History

The history of the securities exchange began formally in the late 19th century with the first establishment in 1891, though informal securities exchanges have been known to take place since 1861.[1] The exchange has predominantly been the main exchange for Hong Kong despite co-existing with other exchanges at different point in time. After a series of mergers and acquisitions, HKSE remains to be the core. From 1947 to 1969 the exchange monopolised the market.

HKEx was formed in 6 March 2000 by a merger of its three main constituent companies. The company itself is listed on its own exchange, the HKSE.

The Hong Kong Government is the single largest shareholder in HKEx, and has the right to appoint six of the thirteen directors to the Board.

Valuation

As at September 2005, the stock exchange had a market capitalisation of HK$ 7,544 billion (US$ 967bn), making it the second-largest stock exchange in the Asia Pacific region after Japan.

As at 2006, with a total market capitalisation of more than HK$10 trillion (US$1.3 trillion), the Hong Kong Stock Exchange ranks 8th in the world by market capitalisation of listed companies.[2] As at 12 July 2007, the Hong Kong Stock Exchange ranks fifth in the world, with a total market capitalisation of over US$2.124 trillion

Merger speculation

After the New York Stock Exchange announced in November 2006 that it would open an office in Beijing to work with the Shanghai Stock Exchange, Hong Kong Exchanges and Clearing chairman Ronald Arculli dampened speculation saying it has no immediate plans to acquire or merge with other exchanges, but would focus on "strengthening our competitiveness and reviewing our listing fees."[3]

Operations

Infrastructure

Computers were integrated on 2 April 1986, which has helped modernise the system.[4] In 1993 the exchange launched the "Automatic Order Matching and Execution System" (AMS) that was replaced by the third generation system (AMS/3) in October 2000.[5] Systems as such were added to meet the increased popularity of online Stock trading.

Trading Hours

The Exchange Exhibition Hall

HKEx trades from 09:30 am to 12:00 pm and from 1:30 pm to 4:00 pm.

Products

Major securities products include equity securities, depositary receipts, debt securities, unit trusts/mutual funds (i.e. ETF's and REIT's) and structured products.[6] Derivative products include index and stock futures and options, interest rate and fixed income products and gold futures.[7]

Controversies

Penny stocks fiasco

In April 2002, HKEx launched a study to consider the delisting of "penny stocks" to improve market efficiency.[8] Its 25 July 2002 proposal to cancel listings of companies trading below HK$0.50 for 30 straight days hit penny stocks hard. Seventeen companies' shares lost more than 30 per cent of their value, and about HK$6 billion in market capitalisation was wiped off 105 listed companies.[9] David Webb said that HKEx's desire to delist stemmed from these companies generating very little revenue for the exchange but taking up a disproportionate amount of staff resources. Webb decried the conflict of interest between its role as operator and regulator, and called on the regulatory role to be passed to the SFC.[9]

On 10 September 2002, a government report was released which found HKEx Chief Executive Kwong Ki-chi guilty of administrative mistakes and said he "should be held responsible on behalf of the HKEx for any major policy shortcomings in the preparation and release of the consultation paper".[10]

Government share purchase

In September 2007, the government revealed that it had increased its stake from 4.41 percent to 5.88 percent. According to market sources, the Government spent HK$2.44 billion to buy 15.72 million shares in the company. The stake would be held by the Exchange Fund as a "strategic asset".[11]

The move has drawn widespread criticism in Hong Kong and abroad: governance advocate and Board member David Webb said that the government was the second-largest single investor in the Hong Kong market after Beijing, with a portfolio of local equities estimated to be worth about HK$150 billion. He said the purchase violated the government's stated principle of "big market, small government", adding that it increased uncertainty and sends a very negative signal to the market as a whole;[12] the Civic Party criticised the Government for damaging public confidence in the capital market, and interfering with the stock exchange's independence; A Wall Street Journal editorial said that the Hong Kong Government is further interfering in the market to "cozy up to China's tightly controlled domestic exchanges".[13] Financial commentator Jake van der Kamp noted the Financial Secretary's conundrum: The government is faced with a conflict of interest, as its desire for an efficient marketplace is contrary to its desire as a shareholder, who would prefer to maximise returns.[14]

The Government said that it wanted to play a positive role in the stock exchange's development as a shareholder. Analysts expect the Government will continue to increase its stake, as HKEx is being prepared "for future integration and alliance with mainland exchanges". Another analyst was concerned about the independence of "Independent Chairman" Ronald Arculli, who also sits on the Executive Council.[12]

Hong Kong stock exchange hacked

On 10 August 2011, the Hong Kong stock exchange was forced to halt trading in the afternoon for 7 stocks, including itself and 2 other blue chip stocks - HSBC Holdings and Cathay Pacific, after its website was hacked during the morning trading session.[15]

Regulation to extend directors' trading blackout

Between 11 January 2008 and 7 April 2008, HKEx launched a consultation paper proposing changes to the Listing Rules "to address 18 substantive policy issues pertaining to corporate governance and initial listing criteria". On 28 November 2008, new rules were announced which included, inter alia, limitation of directors' trading in their companies' shares between the end of each semester until after publication of its results. The Listing Rule amendments were due to become effective on 1 January 2009.[16] The previous blackout period is within one month of publication, and was considered by HKEx to "fail to ensure that insiders do not abuse the market while in possession of unpublished price-sensitive information".[17]

In mid-December, legislators representing the functional constituencies, led by Abraham Razack, Chim Pui Chung and David Li, demanded that regulators postponed the execution of a prolonged blackout proposal. Razack said HKEx did not consult widely enough and the process was a "black- box operation" that did not reflect industry opinion; David Webb said that the campaign was due to some well-connected tycoons and company directors' rearguard action to derail the rule change.[18] On 30 December 2008, the Listing Committee said it would not withdraw the new rule because it would "have a long-term benefit on the market. However it postponed the rules' introduction by three months."[19]

See also

References

  1. ^ HKedu. "HKU." Hong Kong U. Retrieved on 15 February 2007.
  2. ^ English.people.com.cn
  3. ^ Olivia Chung, Arculli maintains HKEx has no merger plans, The Standard, 2 December 2006
  4. ^ HKEX. "HKEX." History of HK exchange. Retrieved on 11 February 2007.
  5. ^ ADVFN. "ADVFN." History of the Hong Kong stock exchange. Retrieved on 11 February 2007.
  6. ^ HKEx. "[1]." Securities Products. Retrieved on 30 April 2011.
  7. ^ HKEx. "[2]." Derivatives Products. Retrieved on 30 April 2011.
  8. ^ Foster Wong (18 April 2002). "Penny stocks face pounding by HKEx". The Standard. Hong Kong. Retrieved 23 July 2008.
  9. ^ a b Anthony Tran (27 July 2002). "Penny stocks hit by sell frenzy". The Standard. Retrieved 23 July 2008.
  10. ^ Staff reporters (12 September 2002). "'Distressed' Ma bows to calls for apology". The Standard. Retrieved 23 July 2008.
  11. ^ Benjamin Scent, Exchange Fund boosts stake in HKEx, The Standard, 8 September 2007
  12. ^ a b Benjamin Scent, Exchange face-off, The Standard, 11 September 2007
  13. ^ Katherine Ng (12 September 2007). "Move to boost HKEx stake was `not intervention". The Standard. Hong Kong. Retrieved 23 July 2007.
  14. ^ Jake van der Kamp, To be world-class, the HK exchange needs to cut fees, Monitor, South China Morning Post, 18 September 2007
  15. ^ Vikram Subhedar and Alison Leung, Hong Kong exchange trading disrupted as hackers target website, Thomson Reuters, 10 August 2011
  16. ^ News Release, Hong Kong Exchanges and Clearing, 28 November 2008
  17. ^ Benjamin Scent, Top guns take aim at new stock exchange regulation, The Standard, 16 December 2008
  18. ^ Mandy Lo and Alfred Liu, Legislators urge delay on blackout extension, The Standard, 24 December 2008
  19. ^ Katherine Ng and Alfred Liu, 3-month delay on blackout, but ..., The Standard, 31 December 2008

External links

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