Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4

Recommendation 5 Recommendation 6 Recommendation 7 Recommendation 8

Market selection

Recommendation 1

Securities Systems* have a primary responsibility to their users** and other stakeholders. They must provide effective low cost processing. Services should be priced equitably.

* Securities Systems = depositories, settlement and clearing systems
** Users = customers of the securities system, and all other parties to whom the securities system owes a duty of care

1.	Is the board that governs the depository answerable to its users?	The depository is operated by the Hong Kong Securities Clearing Company ("HKSCC") which is governed by an executive board. HKSCC is a wholly owned subsidiary of Hong Kong Exchanges and Clearing Limited ("HKEx") which is itself a public company listed on the Stock Exchange of Hong Kong. Members of the board of directors of HKEx include shareholders representatives as well as persons appointed by the Financial Secretary to represent public interests and the interests of market users. The HKEx has also established a Clearing Consultative Panel comprising members of market users. The Consultative Panel advises the HKEx on major issues relating to clearing operation. Members may also raise issues for discussion at the Panel. In addition, both the HKSCC and HKEx are regulated by the Securities and Futures Commission ("SFC") of Hong Kong and have a statutory obligation to the investing public.
2.	Does any single organisation, or sector (e.g. brokers, custodians, Stock Exchange) have a large voting position at the board of the depository?	Yes. As noted above, HKEx, being the holding company of HKSCC, has the entire voting position and the HKSCC Board consists of directors who are all employees of the HKEx. However, the board of HKEx keeps an appropriate balance between shareholder interests and the interests of the public and market users. In addition, under the Exchanges and Clearing Houses (Merger) Ordinance (the enabling legislation for the merger of exchanges and clearing houses under HKEx) enacted in 2000, no single person or related persons may hold or control more than 5% of the voting right of HKEx to ensure that HKEx will not be dominated by the interests of any single person or group of persons.
3.	Is there cross subsidisation of products (e.g. international services subsidised by local ones or transaction costs subsidised by asset servicing charges)?	No. Our charges are calculated based on the types of transactions and/or services and are essentially cost and activity related.
4.	What process is in place at the depository to ensure that it meets the needs of all its stakeholders (e.g. institutions, broker dealers, retail investors, issuers)?	Specifically there is a formal Clearing Consultative Panel appointed by HKEx, the holding company of HKSCC, comprising selected individuals from the securities industry. In general, consultation will be undertaken from time to time to solicit comments from market participants, industry bodies, the SFC and other relevant regulatory bodies in relation to the provision of depository services. Through the Clearing Consultative Panel and the diverse representation on the Board of HKEx and public consultations, HKSCC is made aware of the needs of its stakeholders.
5.	What is the communications strategy of the depository to its stakeholders and how is this run?	HKSCC communicates with its stakeholders directly, thoroughly and in a timely manner via a number of channels including letter, participant circular, hotline service, e-mail network and CCASS terminal, an electronic communications system between participants and the Central Clearing and Settlement System ("CCASS"). At the corporate level, HKSCC also communicates with its stakeholders through seminars, house publications, and so forth. In determining new policies, HKSCC will also consult the market and stakeholders either formally or informally.