Under TPC, clearing and settlement obligations for stock exchange transactions may be transferred from an Exchange Participant to a designated General Clearing Participant (GCP).
The TPC model under consideration gives Exchange Participants the option to outsource clearing and settlement of their stock exchange trades to a designated GCP. Under this arrangement, the Exchange Participants will be classified as Non-clearing Participants (NCP).
TPC will create two new categories of Central Clearing and Settlement System (CCASS) participant, the GCP and the Direct Clearing Participant (DCP). Exchange participants who continue to clear and settle their own trades will be reclassified as DCP and will retain the same rights and obligations as current CCASS broker participants.
A GCP will be either a registered dealer (with or without exchange trading rights) under the Securities Ordinance or an authorised institution under the Banking Ordinance.
"With the introduction of Third Party Clearing, existing and prospective market participants will have the choice to engage a third-party clearer to assume the clearing activities and related obligations. They will be able to formulate their business models in a more flexible way," said Wal Reisch, Head of Clearing Business, HKEx.
TPC will give Exchange Participants more business options and allow them to choose their clearing arrangements. They will not need to meet the funding requirements arising from CCASS risk management measures if they transfer their clearing and settlement obligations to a GCP.
Settlement risk in CCASS may be reduced with the higher netting efficiency resulting from transaction settlements being concentrated in fewer Clearing Participants.
Finally, there may be cost savings to GCP and NCP arising from economies of scale and reduced operating costs, respectively.
HKEx is reviewing and seeking market comments on the detailed requirements for implementing TPC, including operational considerations, changes to regulations and procedures, and GCP admission criteria.
Copies of the TCP paper were despatched to market practitioners, regulators and other industry bodies today. Copies are available at the office of HKEx at 1/F, Exchange Square One and Two, Central, Hong Kong. The paper can also be viewed at or downloaded from the website of HKEx at www.hkex.com.hk.
Responses to the paper should arrive no later than the close of business on 9 August 2002. They should be submitted to:
The Clearing Business Unit
Hong Kong Exchanges and Clearing Limited
7/F Vicwood Plaza,
199 Des Voeux Road Central
Hong Kong
Comments on the paper can also be submitted by facsimile transmission to +1 852 2545 1401.
