SFC Issues Consultation Paper for Paperless Securities Market

The Securities and Futures Commission (SFC) has issued a joint consultation paper this Monday which proposes a revised operational model for an uncertificated securities market in Hong Kong.

The consultation paper was launched in collaboration with the Hong Kong Exchanges and Clearing Limited (HKEX) and the Federation of Share Registrars Limited (FSR).

An uncertificated, or paperless, securities market would mean that investors don’t need to have share certificates or other paper documents to hold and transfer securities, instead they could do so in their own name.

“The digitisation of securities holdings and elimination of manual processes would enhance post-trade Settlement Settlement Settlement in finance refers to the process when a buyer makes payment and receives the agreed-upon services or goods. The term is used on exchanges such as New York Stock Exchange (NYSE) when security changes hands. When the asset is transferred and placed in the new buyer's name, it is considered settled. This process could take a few hours or several days after a trade is made. It depends on the clearance process. In the United States, the settlement date for marketable stocks is usually 2 Settlement in finance refers to the process when a buyer makes payment and receives the agreed-upon services or goods. The term is used on exchanges such as New York Stock Exchange (NYSE) when security changes hands. When the asset is transferred and placed in the new buyer's name, it is considered settled. This process could take a few hours or several days after a trade is made. It depends on the clearance process. In the United States, the settlement date for marketable stocks is usually 2 Read this Term and servicing, making our markets more efficient and globally competitive,” the statement from the SFC said.

The implementation of such a market would be conducted in phases, the regulator continued. Although a new market would require new systems, many of the existing processes can be retained.

HKEX to bear the costs, SFC says

HKEX will largely bear the costs for the new systems to support the revised model. As a result, the cost implications for market participants will ultimately be low.

“The proposed model strikes a balance between preserving existing efficiencies in the Clearing Clearing Clearing is a general term that simply means many different things depending on the subject and related industry. Most commonly, this refers to the reciprocal exchange between banks of checks and drafts, and the settlement of the differences, or the total of claims settled at a clearinghouse. In finance and banking, the word clearing has different meanings depending on the more specific business model. Moving checks from the bank where they were deposited to the bank on which they were drawn. Th Clearing is a general term that simply means many different things depending on the subject and related industry. Most commonly, this refers to the reciprocal exchange between banks of checks and drafts, and the settlement of the differences, or the total of claims settled at a clearinghouse. In finance and banking, the word clearing has different meanings depending on the more specific business model. Moving checks from the bank where they were deposited to the bank on which they were drawn. Th Read this Term and settlement process and providing options for investors to hold securities in uncertificated form,” the regulator added.

The consultation period will last for three months. Market participants have until April 27, 2019, to submit written comments via the SFC’s website, email, post or fax. The full details can be found here.

The consultation paper launched today is the result of a working group led by the SFC to develop an operational model to implement a paperless securities market in Hong Kong. The paper issued today also explains the differences between the model set out today and the one which was initially outlined in another conclusions paper issued back in 2010.