Stock Exchange of Hong Kong Company incorporated under the companies Ordinance Self-regulatory body – responsible for promotion capital formation and securities trading in Hong Kong and China –Providing a fair, transparent and efficient central securities marketplace

Job nature: 1.Provide, regulate and maintain facilities for conducting the business of a stock exchange 2.To provide and operate a stock market for dealing in products, e.g. stocks 3.To maintain to the satisfaction of the SFC an adequate and properly equipped pace of places of business

4.Make a central clearing system and clearing house for each type of securities. 5.To promote and protect the interest of exchange participants and the public 6.To establish equitable prinicple in business transaction 7.To establish and make rules for 1.Exchange participantship 2.Listing securities 3.Periodical or contract levies upon exchange participants 4.Brokerage or commission on securities transaction

8.Advertise or promote the sale of its services Procure the SEHK to be registered or recognized in any country or place in the world.

Securities( products) traded on the SEHK Shares Warrants –Equity warrants –Derivative warrants Bonds Exchange Fund Notes Stock Options Unit Trust/Mutual Fund Nasdaq Stocks

Shares A right to a specified amount of the share capital of a limited company Two types of shares: –Ordinary shares Having vote rights Receive dividends (not mandatory) Account for 99% of the SEHK’s market capitalization –Preference shares A preferential distribution out of profit prior t oany distribution to the ordinary shares Receive fixed dividend ( may receive extra dividend when profit exists) Have a claims in the event of liquidation

Warrants A corporate-created option to purchase a stated number of securities at a fixed price on or before a future date. –Equity warrants Warrants carrying the right to subscribe for equity securities of an issuer or any of its subsidiaries at a pre-determined price. US-style warrants and exercised at any time prior to maturity Minimum term of one year and maximum term of five year –Derivative warrants covered warrant and non-collateralized warrants call or put warrant Issued over assets (currency, commodity )and equity securities low market capitalization and turnover

Bond Represents debts or loans to an entity in which the entity promises to repay the bondholder or note-holder the total amount borrowed at maturity Holder of bonds/ notes are creditors

Exchange Fund Notes In July 1999, HKMA & SEHK agreed to the listing of EFN First EFN was listed in August 1999

Stock Options In September 1995, SEHK introduced the market for stock options In end of 1998, there are 17 stocks with call and put options for trading

Unit Trust/Mutual Fund A form of collective investment through which a number of investors combine their money into a large central pool Each unit trust/ mutual fund specialized investment of a particular type They have a fund manager responsible for investments in the trust or funds

Nasdaq Stocks Seven Nasdaq stocks are permitted to be traded on the exchange floor of SEHK ( not equal to listed) These stocks are: Amgen, Applied Materials, Cisco, Dell, Intel, Microsoft, and Starbucks

Trading system Order-driven system Supported by automatic order matching and Execution System (AMS) New system called “ AMS/3 “ is launched in 10/2000 It consists of –Trading Terminal –Multi-Workstation System (MWS) –Broker Supplied System (BSS) –Order Routing System (ORS)

AMS terminal are available to Exchange Participants Clients’ orders are executed through AMS Exchange participants are allowed to install at their registered business address one or two additional terminals –Increase the trading capacity of exchange participants –Allow to input orders to the AMS from their registered business address (without the telephone connection with floor trader)

The system accepts at action and at-auction limit orders ONLY. –At auction orders An order with no specified price Entered into the trading at the final IEP –At auction limit order An order with a specified price