Hong Kong Exchanges and Clearing Limited (HKEx) constantly explores market development opportunities in order to strengthen the competitiveness of the Hong Kong securities and derivatives markets. It may consult the market from time to time, either publicly or informally, to explore the feasibility of its market development initiatives. To avoid confusion or speculation, HKEx is publishing a quarterly status report on its continuing product and market development initiatives.

Readers of the report should note that the initiatives may be at the preliminary stage and details are not available yet. In addition, these initiatives are subject to support from the market and the approval of regulator(s), and they may or may not materialise in the future.

Cash Market

1. Link with other exchanges under the Global Equity Market partnership talks
HKEx is in discussions with nine other exchanges to explore the feasibility of providing links among the participating exchanges for the cross trading of securities listed on each other's exchanges. The proposed alliance seeks to provide investors around the world with a transparent, round-the-clock, trading mechanism for the world's global companies, increase the global liquidity of the stocks and aid global price discovery. HKEx is prepared to participate in the Global Equity Market initiatives as and when they are decided upon and agreed.

In this connection, HKEx is discussing with New York Stock Exchange (NYSE) on a possible earlier linkage between NYSE, HKEx and Toronto Stock Exchange within the Global Equity Market.

2. Continuous developments of Exchange Traded Fund (ETF) Market:

• Providing listing of ETF on the Hong Kong market;

• Introduction of fixed-income ETF;

• Introduction of further regional ETF

3. Equity Linked Notes

4. Further development of the bond market

5. Trading of regional securities and other related products

Derivatives Market

1. Linkage between HKEx and Sydney Futures Exchange (SFE)

HKEx and SFE are consulting participants and members on the model of co-operation. On 31 January 2001, HKEx and SFE announced a joint strategic initiative to develop a range of new derivative trading and clearing services for the Asia Pacific exchange-traded and over-the-counter marketplaces.

2. International Stock Futures and Options

3. Dow Jones Industrial Average Index Futures and Options

4. Derivatives on Hong Kong Exchange Fund Notes

5. Short Selling Exemptions

HKEx is working on a set of proposals on short selling exemptions for hedging activities of stock futures and options market makers and index arbitrageurs.

6. Block Trading Facility

HKEx is working on rule changes to enable block trading by Futures Exchange participants.

7. Integration of Derivatives Trading and Clearing
HKEx is seeking to integrate the derivatives market infrastructure for stock options and futures into one trading and clearing system. Integration of the trading system is the first step and stock options currently trading on the Traded Options System will migrate to HKATS, Hong Kong Futures Automated Trading System. Integration of derivatives clearing will follow. The integrated derivatives clearing system is named DCASS, Derivatives Clearing and Settlement System.

HKEx intends to make separate public announcements in due course on further details of these market development projects as they progress.