1. Clearing Infrastructure of Hong Kongs Securities and Derivatives Market Mr KC Kwong Chief Executive Hong Kong Exchanges and Clearing Limited 1 June 2001 Hong Kong Securities Institute Luncheon

2. HKSI Luncheon 1 June 2001Page 2 Demutualisation & Merger HKEx Corporate Structure HKEx Securities MarketsDerivatives Markets FuturesStock Options Trading Clearing SEHK HKSCC HKFE HKCCSEOCH SEHK

3. HKSI Luncheon 1 June 2001Page 3 Post Merger Systems Infrastructure TradingClearing SecuritiesAMS/3CCASS Stock OptionsTOPSTOPS FuturesHKATSAS/400 Derivatives Trading Integration (2001) TradingClearing SecuritiesAMS/3CCASS Stock OptionsHKATSTOPS FuturesHKATSAS/400 Derivatives Clearing Integration (2002) TradingClearing SecuritiesAMS/3CCASS Stock Options & FuturesHKATSDCASS Market Infrastructure

4. HKSI Luncheon 1 June 2001Page 4 Clearing Infrastructure for Future u CCASS for Securities u DCASS for Derivatives u Common Risk Management System (CRMS) u Common Collateral Management System (CCMS) Market Infrastructure

5. HKSI Luncheon 1 June 2001Page 5 Vision of Common Access and Network Open Messages StandardAPI basedThin Client / Browser Based GSTPASWIFT Common Gateway Internet Common Access Point Third party Interfaces Cash Market Participants Overseas Participants Derivatives Market Participants FinNet AMS/3 CCASS/3 Technical Architecture - Open Connectivity - De-coupled Subsystems Functional Architecture - Multiple Market Infrastructure - Extended Operation Hours - Flexible Settlement Operations HKATS – OM CLICK DCASS – OM SECUR CRMS CCMS RMS/S RMS/D Common Risk Management And Collateral Management Payment System Systems Overview

6. HKSI Luncheon 1 June 2001Page 6 CCASS Upgrade Project (CCASS/3) Features Technical Architecture Upgrade u Database Segmentation u Middle-Tier u User Access Options Browser API SWIFT (GSTPA) u Message Based Data Flow u ISO 15022 Compliance u New CCASS Network (FinNet) Market Infrastructure

7. HKSI Luncheon 1 June 2001Page 7 Functional Architecture Upgrade u Multi-Market Structure u Variable Settlement Cycles (T+x) u Extended Trading Hours CCASS Upgrade Project (CCASS/3) Features Market Infrastructure

8. HKSI Luncheon 1 June 2001Page 8 u Integrated Clearing System for Futures and Stock Options u A Seamless Trading and Clearing Derivatives Platform OM SECUR – Clearing OM Click - Trading Single Derivatives Clearing and Settlement System (DCASS) Market Infrastructure

9. HKSI Luncheon 1 June 2001Page 9 Common Risk Management System u Integrated Risk Profiles u Cross Product Assessment u Cross Participants Analysis u Real-Time Monitoring

10. HKSI Luncheon 1 June 2001Page 10 Common Collateral Management System u Common Collateral Pool Multi-Currency Cash Non-Cash Securities

11. HKSI Luncheon 1 June 2001Page 11 Benefits to Market u Enhanced market infrastructure u More flexible system architecture u Convergence with international standards u Better and integrated risk management u Better support for product and market developments

12. HKSI Luncheon 1 June 2001Page 12 Benefits to Market (contd) u Facilitate strategic alliance with major international financial centres u Increase investment product variety u Improve system and operational efficiency u Improve risk management u Support future major market initiatives

13. HKSI Luncheon 1 June 2001Page 13 Benefits to Market Participants u Reduce operating costs u Increase back office efficiency u Enhance risk management through real time access to information u More business opportunities

14. HKSI Luncheon 1 June 2001Page 14 Key Milestones u All projects to complete by second quarter of 2002 u Street-wide tests for different systems between end 2001 and mid 2002. u First market briefings in June 2001.

15. HKSI Luncheon 1 June 2001Page 15 Conclusion Q & A