1 Achievements and New Initiatives Achievements and New Initiatives Paul Chow Chief Executive, Hong Kong Exchanges and Clearing Limited 7 January 2005

2 NEW RECORDS SET IN 2004 New Records in the Securities Market 2004 (up to year-end)Previous Record Market Capitalisation$6,695.9 bil (31 Dec 2004) All-time high Market Turnover$3,974.1 bil $3,789 bil (Year 1997) Securities Achieved Highest Turnover Record Trading Value of H Shares$941.1 bilAll-time high Trading Value of Derivative Warrants$524.5 bilAll-time high Number of Newly Listed Derivative Warrants1,259All-time high

3 New Records in the Derivatives Market Volume Number of Contracts in 2004 Previous All-time-high Yearly Records (up to year-end)ContractsYear Total Futures and Options19,629,692 14,546, Total Futures11,884,152 8,174, Total Options7,745,540 6,371, Stock Options5,611,832 4,220, Hang Seng Index Futures8,601,559 6,800,

4 Streamlined enforcement process Implemented Code of CG Practices & CG Report Issued rule amendments to CG issues & initial listing criteria Published Listing Committee Annual Report Enhanced regulation of sponsors & IFAs Published Interpretive Letters – Rejection Letters Series on website Listing Regulation 2004 Achievements Trading Reviewed usage of Trading Hall upon expiry of lease and launch relinquishment programme for on-floor terminals Reviewed narrowing of trading spreads Reviewed market making for ETFs Launched new products, including H-shares Index Options and 4 stock options and futures on H-shares Clearing Concluded way forward for scripless market operating model Enhanced Investor Account Service Signed a MOU with China Securities Depository and Clearing Corporation Limited

5 Market Systems Launched DCASS Maintained 100% system uptime Given Gold Award in 2004 IT Excellence Award Information Services Revamped HKEx Website Disseminated odd lot market data Expanded information dissemination in Mainland and Japan China Dimension Strengthened Beijing Office; stationed representatives in Shanghai and Guangzhou Continued market education efforts and organised conferences to promote services of Hong Kong market

6 Listing Regulation Review the role and structure of the Listing Committees Work with our Mainland counterparts to establish a framework for the simultaneous listing of H-shares in Hong Kong and A shares on the Mainland Review the operation and regulatory policy of GEM Improve the efficiency of listing application and IPO vetting processes Support the establishment of statutory listing requirements and a more regulatory framework for the accounting industry Further efforts to enhance corporate governance and effective quality management after listing 2005 Major Initiatives

7 Exchange Implement Phase 1 of narrowing trading spreads Improve market-making for exchange-traded funds Design and begin fitting out the new multi-function Trading Hall Revamp the stock options market and introduce more stock options on Mainland enterprises listed in Hong Kong Consider introducing new products Callable Bull/Bear Certificates and futures and options on the FTSE/Xinhua China 25 Index Review position limits and market-making obligations in the derivatives market

8 Clearing Implement a general collateral policy Implement the model for a scripless securities market Strengthen HKExs nominee services Establish a framework for agency arrangements in CCASS and overseas access to CCASS Consider the possibility of T+2 settlement finality

9 Information Technology Consolidate the existing networks for the four major market systems Upgrade host capacity and network of AMS/3 Replace technology and system software nearing obsolescence and consolidate satellite applications Enhance CCASS Upgrade the system capacity and functionalities of HKATS and DCASS, and conduct a feasibility study of upgrade the HKATS and DCASS software Upgrade the HKEx website capacity and establish a disaster recovery website

10 Information Services Expand the dissemination of information of the HKEx markets in the Mainland and other selected regional markets Recruit new information vendors and review the reporting and compliance regime for information vendors that work with HKEx Upgrade derivatives market data dissemination capacity Streamline processes for handling the increasing workload stemming from continuous increase in volume of issuer news and Disclosure of Interests filings

11 Business Development & Investor Services Continue efforts to promote services offered by the Hong Kong securities market to attract issuers and fund providers Continue to organise training seminars for investors, Exchange Participants, issuers and potential issuers

12 THANK YOU THANK YOU