The Clearing and Settlement Systems Ordinance comes into effect today (Thursday).
The Ordinance establishes a statutory regime for the Monetary Authority (MA) to designate and oversee clearing and settlement systems that are material to the monetary or financial stability of Hong Kong or to the functioning of Hong Kong as an international financial centre. The Ordinance also provides statutory backing to the finality of settlement for transactions made through systems designated under the Ordinance by protecting the settlement finality from insolvency laws or any other laws. To this end, the MA will issue a certificate of finality to designated systems meeting the safety and efficiency requirements specified in the Ordinance.
"The Ordinance will provide statutory backing to the Monetary Authority's oversight of important clearing and settlement systems, and legal certainty for settlement finality. In doing this, the Ordinance will promote the safety and robustness of Hong Kong's financial infrastructure and the financial stability of Hong Kong," said Mr Joseph Yam, the Chief Executive of the Hong Kong Monetary Authority (HKMA).
The Ordinance specifies that the Central Moneymarkets Unit (CMU)1 and Hong Kong dollar Clearing House Automated Transfer System (CHATS)2 are deemed to have been designated and that a certificate of finality is also deemed to have been issued to each of these two systems. Starting from 4 November all transactions effected through the CMU or Hong Kong dollar CHATS will enjoy statutory backing to their settlement finality.
The MA intends to designate Continuous Linked Settlement (CLS) System3 , US dollar CHATS4 and Euro CHATS5 by the end of November, since they fulfil the designation criteria. The MA is also prepared to issue a certificate of finality to each of these three systems after they are designated since they also meet the safety and efficiency requirements specified in the Ordinance.
The Hong Kong dollar will be ready to join the CLS System after settlement finality has been granted to the system. "The participation of Hong Kong dollar in the CLS System, along with other major currencies, is important to Hong Kong's status as an international financial centre," said Mr Yam.
Following the commencement of the Ordinance, an independent Clearing and Settlement Systems Appeals Tribunal is established today under the Ordinance to hear appeals by any party who is aggrieved by a decision of the MA in relation to designation and related matters. The Tribunal is chaired by a judge and consists of a panel of members who are appointed by the Chief Executive of the Hong Kong Special Administrative Region.
A Process Review Committee, composed of independent members, is being established to review processes and procedures adopted by the MA in making decisions relating to or affecting the designated systems in which the MA has a legal or beneficial interest, as compared to other systems.
Information about the Ordinance and related matters is available at the HKMA website (http://www.hkma.gov.hk).
For further enquiries, please contact:
Jasmin Fung, Manager (Press), at 2878 8246 or
Kevin Ip, Manager (Press), at 2878 1687
Hong Kong Monetary Authority
4 November 2004
1CMU is a debt securities clearing and settlement system operated by the HKMA.
2Hong Kong dollar CHATS is a real time gross settlement system for Hong Kong dollar, where interbank payments are settled across the books of the HKMA.
3 CLS System is a global clearing and settlement system for cross-border foreign exchange transactions.
4 US dollar CHATS is a real time gross settlement system for US dollar-denominated transactions within the Hong Kong time zone. HSBC is the settlement institution of US dollar CHATS.
5 Euro CHATS is a real time gross settlement system for euro-denominated transactions within the Hong Kong time zone. Standard Chartered Bank (Hong Kong) Limited is the settlement institution of Euro CHATS.
