The four spearheads in Chinese stock exchange

Shanghai Stock Exchange

The Shanghai Stock Exchange (the Shanghai SE) was founded on Nov. 26th, 1990, and in operation on Dec.19th the same year. It is a membership institution directly governed by the China Securities Regulatory Commission (CSRC). The Shanghai SE bases its development on the principle of “legislation, supervision, self-regulation and standardization” to create a transparent, open, safe and efficient marketplace. The SSE endeavors to realize a variety of functions: providing marketplace and facilities for securities trading; formulating business rules; accepting and arranging listings; organizing and monitoring securities trading; regulating members and listed companies; managing and disseminating market information.

After several years’ operation, the Shanghai SE has become the most preeminent stock market in Mainland China in terms of number of listed companies, number of shares listed, total market value, tradable market value, securities turnover in value, stock turnover in value and the T-bond turnover in value. At the end of 2008, SSE boasted 1,184 listed securities and 864 listed companies, with a combined market capitalization of RMB 9,725.191 billion and a total of 79.7287 million trading accounts. In 2008, listed companies raised RMB 89.291 billion on SSE through IPO and new share placement. A large number of companies from key industries, infrastructure and high-tech sectors have not only raised capital, but also improved their operation mechanism through listing on Shanghai stock market.

Entering the new century, Shanghai SE is faced with great opportunities as well as challenges to further boost the market construction and regulation. Combining the cutting-edge hardware facilities, favorable policy conditions in Pudong and exemplary role of Shanghai economy, Shanghai SE is fully committed to the goal of State-owned industrial enterprises reform and developing Shanghai into an international financial center with great confidence.

Shenzhen Stock Exchange

The Shenzhen Stock Exchange (the Shenzhen SE) is a mutualized national stock exchange under the CSRC and provides a venue for securities trading. A broad spectrum of market participants, including 540 listed companies, 35 million registered investors and 177 exchange members, create the market. Here buying and selling orders are matched in a fair, open and orderly market, through an automated system to create the best possible prices based on price-time priority.

Since its creation in 1990, the Shenzhen SE has blossomed into a market of great competitive edges in the country, with a market capitalization around RMB 1 trillion (US$ 122 billion). On a daily basis, around 600,000 deals, valued US$ 807 million, trade on the SSE.

China securities market is undergoing fundamental changes. The implementation of the new Securities Law, Company Law, self-innovation strategy as well as the development of non-tradable share reform embodies enormous opportunities to the market. Adhering to the principle of “Regulation, Innovation, Cultivation and Service”, the Shenzhen SE will continue to maintain its focus on developing the Small and Medium Enterprises Board, while seeking for a tier market.

Hong Kong Exchanges and Clearing Limited

In his 1999 Budget Speech, Hong Kong’s Financial Secretary announced comprehensive market reform of the stock and futures markets. The reforms were designed to increase competitiveness and meet the challenges of an increasingly globalised market.

Under the reform, The Stock Exchange of Hong Kong Limited (SEHK), Hong Kong Futures Exchange Limited (HKFE) demutualised and together with Hong Kong Securities Clearing Company Limited (HKSCC), merged under a single holding company, Hong Kong Exchanges and Clearing Limited (HKEx).

This was achieved by the approval of the Schemes of Arrangements of SEHK and HKFE at their respective general meetings on 27 September 1999, which were then approved by the Court on 11 October 1999.  The merger of the three institutions took operational effect on 6 March 2000, and HKEx listed itself on SEHK by introduction on 27 June 2000.

Reports of securities trading in Hong Kong date back to the mid-19th century. However, the first formal market, the Association of Stockbrokers in Hong Kong, was not established until 1891. The Association was re-named the Hong Kong Stock Exchange in 1914.

A second exchange, the Hong Kong Stockbrokers’ Association was incorporated in 1921. The two exchanges merged to form the Hong Kong Stock Exchange in 1947 and re-establish the stock market after the Second World War.

Rapid growth of the Hong Kong economy led to the establishment of three other exchanges – the Far East Exchange in 1969; the Kam Ngan Stock Exchange in 1971; and the Kowloon Stock Exchange in 1972.

Pressure to strengthen market regulation and to unify the four exchanges led to the incorporation of SEHK, the Stock Exchange of Hong Kong Limited in 1980. The four exchanges ceased business on 27 March 1986 and the new exchange commenced trading through a computer-assisted system on 2 April 1986. Prior to the completion of the merger with HKFE in March 2000, the unified stock exchange had 570 participant organizations.

Established in 1976, the Hong Kong Commodity Exchange (the predecessor of Hong Kong Futures Exchange Limited) is a derivatives leader in the Asia-Pacific region.  The main products traded on the commodity exchange were cotton futures, sugar futures, soybean futures and gold futures.  The Hong Kong Commodity Exchange was renamed the Hong Kong Futures Exchange (HKFE) on 7 May 1985.

HKFE launched on 6 May 1986 its flagship product, the HSI Futures, which is still its most popular futures product in HKEx’s derivatives markets today.  HKFE provides efficient and diversified markets for trading futures and options contracts by its more than 160 participant organizations, including many that are affiliated to international financial institutions. The derivatives market under HKEx trades a broad range of products, including equity index, stock and interest rate.

HKEx and its subsidiary companies, HKFE Clearing Corporation Limited and SEHK Options Clearing House Limited operate rigorous risk management system which enables participants and their clients to meet their investment and hedging needs in a liquid and well-regulated market place.

Hong Kong Securities Clearing Company Limited was incorporated in 1989. It created CCASS, the central clearing and settlement system, which started operating in 1992 and became the central counterparty for all CCASS participants.

The clearing operation is based on the immobilization of share certificates in a central depository. Share settlement is on a continuous net settlement basis by electronic book entry to participants’ stock accounts in CCASS. Transactions between CCASS participants are settled on T+2, the second trading day following the transaction.

Taiwan Stock Exchange Corporation

Since its inception in 1961, Taiwan Stock Exchange Corporation (TWSE) has kept pace with the market development and the most up-to-date technologies. TWSE works with the competent authority, Financial Supervisory Commission (FSC), to deregulate and liberalize Taiwan’s stock market, and gears itself up more in line with major international market.

To speed up the liberalization and internationalization of the Taiwan securities market, TWSE has actively reached out to the world in recent years. They have hold promotional tours to the major financial centers in the world and other promising areas such as the Middle East. In addition, TWSE has hold conferences or meetings, at which famous foreign scholars or experts are invited to talk to the local market about current market trends and at the same time inform foreign investors of the continuing liberalization of our stock market.

In order to keep up with the international trend of developing index-related products, TWSE, in association with FTSE, has launched a series of tradable indices in Taiwan: the “TWSE Taiwan 50 Index” on October 29, 2002, “TWSE Taiwan Mid-cap 100 Index” and “TWSE Taiwan Technology Index” on November 29, 2004, “TWSE Taiwan eight industries Index” and “TWSE Taiwan dividend+ Index” on January 15, 2007. TWSE will continue to cooperate with FTSE, in accordance with international standards, to compile more indices to be used as underlying indices of new financial products.

Source: http://www.sse.com.cn/sseportal/ps/zhs/home.html; http://www.szse.cn/main/en/aboutsse/sseoverview/; http://www.hkex.com.hk/exchange/history/history.htm; http://www.twse.com.tw/en/about/company/welcome.php

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