HKFE To Introduce Five-Point Plan To Enhance Transparency On The Trading Floor

The Hong Kong Futures Exchange (HKFE) said today that it has appointed a new Floor Conduct Committee (FCC) and will implement a five-point plan to enhance transparency on the trading floor. This plan has been reviewed informally with the Securities and Futures Commission (SFC). Any specific rule changes required under this plan would be submitted to the SFC for approval. The FCC is chaired by Exchange Director Gary Cheung, and has responsibility to: Consider and recommend proposed changes to the floor trading procedures and the physical floor configuration for the Board's approval; and Foster good communication between the Exchange and Members' floor representatives. The five-point plan comprises the following elements: A requirement that Members install recording devices on all telephones located at the floor booths. Members have previously been required to record all client orders and trade confirmations communicated over the telephone. This new requirement will help enhance the Exchange's ability to enforce this rule. Telephone tape recordings help to create proper audit trails and protect Members and clients in the event of confusion about orders or trade executions. This requirement will become effective in about one month as will be advised to Members in advance. A ban on untaped mobile communications devices on the trading floor. This ban will prevent untaped communications between individuals on the trading floor and external locations via mobile devices, including mobile phones, cordless phones and walkie-talkies, consistent with the first element of this plan. Mobile communications devices which can receive and transmit outside the floor are prohibited in all major futures and options markets overseas. This requirement will become effective in about one month as will be advised to Members in advance. Deployment of additional Exchange resources for surveillance of cross-trades. Floor traders are required to execute cross-trades in the trading pit according to standards set forth in Exchange rules and procedures. Additional Exchange surveillance resources will assist floor traders in observing these requirements. This deployment is effective immediately. Enhanced price-reporting system. Proposed system enhancements would involve modifications to the trading pit and add price-reporting workstations. The details and time schedule for these enhancements and modifications will be considered by the FCC. Market-opening procedures. This element involves the proposed implementation of a call rotation system for openings of the HSI Futures market. The objective would be to reduce excessive price movements and provide a better indication of price levels during the HSI Futures market-opening period. The details and time schedule for implementing any new procedures will be considered by the FCC. "The new measures will enhance the transparency of the trading floor and the new Floor Conduct Committee will be looking to build on them," Chairman Dr. Geoffrey Yeh said. "We are committed to transparency and the initiatives we are announcing are another demonstration of that commitment. Dr. Yeh added: "The objective of the five-point plan and the establishment of the Floor Conduct Committee is to provide Members and their clients an extra measure of confidence leading up to the migration of HSI Futures and Options to HKATS early next year." "I believe it is important for self-regulation to become a badge of quality for the Hong Kong Futures Exchange, and for Hong Kong as an international financial centre, so the Exchange may be better able to attract both local and international investors," Acting Chief Executive William D. Grossman said. "The development and successful implementation of this five-point plan, and the establishment of the Floor Conduct Committee, demonstrates the commitment of the Exchange to provide a top-quality self-regulatory programme." "Maintaining a proper environment on the trading floor has always been a top priority," added Mark Ho, who is Head, Compliance Department. "We are strengthening a very sound system." The Hong Kong Futures Exchange is a leading futures and options market place in the Asia Pacific Region, with a membership of over 130 companies, including a number of major international institutions. The Exchange is actively diversifying its product base, which now includes currency, interest rate and equity-based products.