The Stock Exchange of Hong Kong (SEHK) signed a Listing Agreement for Exchange Fund Notes (EFNs) today (Monday) with the Hong Kong Monetary Authority (HKMA). The HKMA also signed an agreement with Hong Kong Securities Clearing Company Limited (HKSCC) to admit EFNs as eligible securities in CCASS, the Central Clearing And Settlement System.
The Listing Agreement was signed by the SEHK Chief Executive, Alec Tsui and HKMA Deputy Chief Executive Tony Latter, and the Admission Agreement was signed by Mr Latter and Stewart Shing, HKSCC's Chief Executive, at a tripartite signing ceremony.
The SEHK is launching a bond trading market next month. It announced the market infrastructure for the tendering and trading of EFNs in June. Issued by the HKMA on behalf of the Hong Kong Special Administrative Region Government for the account of the Exchange Fund, the EFNs will be the inaugural issue to be listed on the market.
Chairman of the SEHK, Lee Hon Chiu, said exchange trading of debt securities would increase the transparency of corporate borrowing. "It will also increase the liquidity of debt securities and provide an additional source of funds for issuers.
"One of the SEHK's objectives is to develop into a full services securities market. Trading in EFNs and other debt securities will expand the SEHK's product range. It will also help to realise the full potential of the debt securities market," Mr Lee said.
All listed issuers are required to enter into a Listing Agreement before their securities may be listed on the SEHK. The agreements set out the areas of responsibility of listed issuers and of the SEHK. The signing of the agreement marks the completion of a further stage in the procedures necessary for the listing of EFNs on the SEHK.
At today's ceremony, Joseph Yam, Chief Executive of the HKMA said, "Today's signing ceremony paves the way for the listing of Exchange Fund Notes on the Hong Kong Stock Exchange next month. In addition to offering retail investors an attractive and reliable investment opportunity this listing will mark an important milestone in the development of Hong Kong's debt market."
"I very much hope that this joint effort by the Hong Kong Stock Exchange, the Hong Kong Securities Clearing Company and the HKMA will successfully stimulate retail interest in our Exchange Fund Notes and, more importantly, retail interest in debt instruments generally," he added.
The first issue of EFNs on the SEHK is expected to be listed on August 16. Trading in EFNs will be scripless. Trades executed in the SEHK's trading system will be settled through HKSCC's CCASS.
John Chan, HKSCC's Chairman, said the admission of EFNs in CCASS would provide CCASS Participants, including Investor Participants, with a convenient way to tender for, clear and settle EFNs.
"HKSCC has developed an electronic tendering mechanism in CCASS for the new scripless debt securities. And, as a recognised dealer and member of the Central Moneymarkets Unit of the HKMA, HKSCC will also facilitate cross-system settlement between institutional investor and retail investor markets," Mr Chan said.
The listing of EFNs is a significant step of the development of the Hong Kong bond market, which will make EFNs accessible to retail investors. The SEHK, HKMA and HKSCC believe that the listing will boost the development of the local bond market by paving the way for similar listings by other public and corporate issues.
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For enquiries, please contact Kent Chen of HKMA at 2878 8246, Henry Law of SEHK at 2840 3862, or Betty Chan of HKSCC at 2597 0870.