Opening Remarks at the Inaugural Seminar of Hong Kong Foreign Exchange and Money Market Practices Committee
Speeches
16 Jan 2001
Opening Remarks at the Inaugural Seminar of Hong Kong Foreign Exchange and Money Market Practices Committee
Joseph Yam, Chief Executive, Hong Kong Monetary Authority
Good afternoon
Mr Powell,
Mr Mathieson,
Guests,
Ladies and Gentlemen,
- I am delighted to welcome all of you to today's seminar. This
is the inaugural seminar of the reconstructed Hong Kong Foreign
Exchange and Money Market Practices Committee (MPC). The
organisation of seminars by the MPC will, I hope, provide bankers,
treasurers and other market practitioners with an opportunity to
focus on issues of common interest. It will help specifically to
fulfil at least two of the objectives of the MPC: to promote
understanding and expertise relevant to the markets; and to
encourage communication among market participants and professional
bodies, both local and overseas.
- The MPC was first established in 1992, as a non-statutory body,
with the mandate to give advice on matters relating to the health
and development of Hong Kong's foreign exchange and money markets.
Last year was a year of restructuring and recovery for Hong Kong,
and the MPC seems to have been following very much the same path.
After a review of its functions, the Committee decided to
restructure itself, with a view to playing a fuller role in
developing and promoting the forex and money markets in Hong Kong.
It has broadened its representation and established three
sub-committees, which deal with issues ranging from market
practices and product development to training and education. The
Committee also expects to adopt a higher profile - for example,
through the publication of standard documentation and promotional
literature, and by organising seminars of the kind that we are
having today.
- The reconstructed MPC has already begun to show achievements.
Some of its contributions may seem a little quaint, such as its
work in formulating a set of standard typhoon and rainstorm
procedures for settling foreign exchange and money market
transactions under extreme weather conditions. But just imagine the
chaos and confusion if everyone were to adopt a different
methodology for interest calculations and use a different date to
settle the trades every time the markets close down because of bad
weather. The MPC has also been advising the HKAB on other payment
and settlement standards. Again, the advice given may seem
insignificant or prosaic, like the creation of a standard format
for the settlement code needed by participants in our new US dollar
clearing system; but it is often tiny creations like this one that
go a long way towards strengthening efficiency in payment and
settlement systems.
- Apart from this "domestic" work, the MPC has also served as a
window connecting the local forex and money market industry with
the outside world. It has already started to strengthen its ties
with overseas foreign exchange committees. These efforts help to
keep local practitioners abreast of what is going on in overseas
markets, and of product development, as well as codes and
standards. This is important in ensuring that the professionalism
of market practitioners in Hong Kong can be maintained at
internationally accepted levels.
- In this connection, the MPC has recently been consulted on the
draft Model Forex Guidelines prepared by an international private
sector task force under the encouragement of a small group of
central bank sponsors, including the HKMA. The draft Guidelines are
formulated to ensure that the industry will follow the best market
practices and avoid potentially problematic trading practices, such
as trading at illiquid hours or spreading rumours and false
information. The MPC has expressed support for the draft and will
consider incorporating the proposed Guidelines into its Code of
Conduct for Hong Kong practitioners. This is a very positive move.
An abundance of international financial activities take place in
Hong Kong. The adoption of the proposed Guidelines in Hong Kong
will go a long way towards enhancing the integrity of our markets
and sustaining the development of Hong Kong as an international
financial centre. It will also contribute to greater financial
stability in our domestic markets.
- There are a number of future challenges that the forex and
money markets players will have to face, including the changing
landscape of the industry. In a number of ways I feel that the
world's foreign exchange and money markets may have reached
something of a watershed in the past year or so. We have witnessed
a reduction in the number of significant world currencies as a
result of the arrival of the euro. We have also seen accelerating
consolidation among the ranks of major players. These two factors
have tended to reduce the volume of interbank business. Meanwhile
the traditional market infrastructure is being supplemented and
challenged by the emergence of new electronic trading platforms.
And, while there has already been for many years a strong momentum
for product innovation, the pressure to sustain profits may most
recently have intensified that search. At the same time the
regulators are as anxious as ever to ensure that risks are properly
understood (both by themselves and by the bankers) and
appropriately managed. I am sure that the MPC will play a useful
role in helping the industry meet this challenge, by providing
training for new practitioners and continuing its work on product
development. The recent study on the feasibility and desirability
of introducing overnight index swaps in Hong Kong is one good
example of this work.
- I should perhaps stop here to avoid encroaching further on the
valuable time set aside for our guest speaker today. Donald
Mathieson of the IMF is no stranger to Hong Kong. Many of you will
be familiar with the authoritative reports and analysis of
financial markets that he and his colleagues produce. We are
fortunate in having been able to grab him for a couple of hours
today while he is briefly passing through Hong Kong. It is my
pleasure to welcome him and to join with you all in the launch of
this seminar, which will, I hope, be the first of many organised by
the MPC over the coming months and years.
- Finally, let me record my gratitude and congratulations to all
the Committee members of the MPC for the excellent work they have
put into the reconstruction of the Committee, and my thanks to
everyone here for supporting this event today.