Hong Kong Exchange is closely monitored and regulated

Hong Kong Exchange is closely monitored and regulated in the discharge of its public interest duty

By Henry Law

Published: December 9 2005 02:00 | Last updated: December 9 2005 02:00

From Mr Henry Law.

Sir, With reference to the letter from William Gamble (December 7): Hong Kong Exchange (HKEx) wishes to clarify two key points.

First, there is an explicit provision in Section 63 of the Securities and Futures Ordinance requiring HKEx to act in the interests of the public, having particular regard to the interest of the investing public, and to give precedence to those interests if they conflict with HKEx's own commercial interest while discharging its obligations.

The manner in which HKEx discharges its public interest duty is closely monitored and regulated by the Securities and Futures Commission (SFC), and the SFC has the power to give directions to HKEx if it considers that a conflict of interest exists between HKEx's public interest functions and any of its other interests. Furthermore, the level of fees and charges levied by HKEx for all of its regulated activities are subject to SFC approval.

On the question of jurisdiction, Hong Kong's situation is not unique. Increased globalisation has resulted in numerous companies listing outside their home markets. For example, there are Latin American companies listed in the US and companies from Russia and central Asia have opted to list in the UK, thousands of kilometres from their headquarters.

To help meet the challenges stemming from cross-border listing, regulation and enforcement, regulators and exchanges from Hong Kong and Mainland China signed the Memorandum of Regulatory Co-operation (MORC) in June 1993. Under the MORC, five parties meet every quarter to discuss and resolve regulatory issues and other matters of mutual interest.

We hope this clarification will correct the misunderstandings that result in suggestions that investor protection at HKEx falls short of international standards.

Hong Kong's financial markets are open to all and we welcome investors who wish to join the many leading international institutions that have become active participants in HKEx's securities and derivatives markets.

Henry Law,

Head, Corporate Communications,

Hong Kong Exchanges and Clearing,

Central, Hong Kong