I am delighted to welcome all of you to today’s conference on ‘Challenges and Opportunities in the New Century’. This is something of a landmark, being the first major conference ever staged by Hong Kong’s Foreign Exchange and Money Market Practices Committee.

You don’t need me to tell you that there are a number of challenges facing your markets at present: the introduction of the euro and the consolidation in the banking industry have been reducing trading volumes; traditional market infrastructures are being supplemented and challenged by the emergence of new electronic trading platforms; and the general macroeconomic climate is not particularly comfortable for anyone at present. Today’s programme covers these and other issues, ranging from the broader economic and financial trends affecting the markets to some narrower but no less important technical aspects.

The programme was being prepared long before 11 September hit us, but perhaps I could use this brief slot in your timetable to say a few words about that.

As we recover from the shock and devastation of those terrible events, and absorb the consequences, we can perhaps reflect with some relief and satisfaction on the resilience displayed by financial markets and institutions, both in the United States and further afield.

Of course, prices in markets – more so, understandably, in equity markets than elsewhere – reacted quickly to the events and to subsequent policy measures. Such adjustment is the proper function of markets, taking new information efficiently on board.

But the markets themselves continued on the whole to operate well, despite major physical disruptions and, in some cases, human tragedies. True, there were some delays in settlements, some markets were closed for one or more days, and there was an understandable contraction in business volumes. Yet there were no serious or lasting failures of markets or institutions that threatened overall systemic stability.

Was this simply good luck? I don’t think so. Rather it reflected the fact that very deliberate steps have been taken in the financial world over a period of many years to try to ensure that institutions and infrastructures are able to cope with the unexpected. Let me list four particular factors to illustrate this point in relation to the foreign exchange and money markets.

First, I would mention general confidence in the soundness of the major market players. I do not mean by this that all the banks are necessarily free from problems and totally above reproach. But, notably since the LTCM crisis, which provoked some greater attention to liquidity management, risk management and so on, I sense that the authorities are now perceived as being closer up with the game and the banks themselves as better prepared to cope with shocks. Thus, in the context of 11 September, such limited increases in credit exposures as may have arisen because of settlement delays did not provoke any serious panic.

This was helped by the second factor which I want to note. That was the readiness of the authorities in different centres after 11 September to quickly make assurances about the availability of liquidity to their respective banking systems. Extra liquidity may have been needed to cover actual delays in the mechanics of settlement or simply to balance the precautionary hoarding of liquidity by some players. Whatever the precise reason, the fact that the authorities pledged support was instrumental in keeping the wheels moving – and probably in limiting the actual call on the facilities which were offered.

Third, systems and backup facilities demonstrated remarkable robustness in the face of the disaster. There were of course a few hiccups but, generally speaking, business kept going, even in those institutions most seriously affected in physical terms. I believe that the ability to cope in September was in no small part due to the huge efforts put into contingency planning ahead of Y2K. I recall that, once the smooth and trouble-free transition to the year 2000 was complete, there were voices questioning whether so much time and money need have been devoted to that exercise, but it now appears to have actively served us well. However, although this is a source of some satisfaction, it should not be a reason for complacency. We have witnessed a fundamental change in the nature of terror and potential breakdown, and we may, going forward, need to review contingency plans accordingly.

Last but by no means least, we have to pay tribute to the work of committees such as the Market Practices Committee here and similar organisations in other centres, and to the people who actually operate the markets. The smooth functioning of the markets and the ability to deal with disruptions owe much to the painstaking efforts which have been made over the years to develop and agree operational guidelines, codes of conduct and the like, both of international application and to address local idiosyncracies (such as, in our case here in Hong Kong, interruptions on account of typhoons). These committees and other bodies have served the crucial role of ensuring that market practices are essentially practitioner-driven, while acting also as a mutually beneficial bridge between the practitioners and the authorities. The guidelines and codes which have emerged provide, among many other things, recommended contingency procedures which are invaluable whenever something unusual does occur.

The capacity to cope with the unforeseen also owes much to personal contacts and to the trust which exists between market participants. Even in the third or fourth decade of the electronic age, this human element is still a very significant ingredient.

In that latter context particularly, a conference of this nature can play an important role. I should like to welcome especially those who have come to join us from outside Hong Kong. These are not the easiest of times for deciding to travel the world. But before any of you are tempted to draw mistaken conclusions from the observed shortage of Americans here today, I know that the Committee would wish me to pass on its apologies for having scheduled this event on Thanksgiving Day. As with all such conferences, I understand that it was necessary to juggle various permutations of the availability of different people and venues, and it turned out that today would be the least awkward for the largest number of potential participants – but that did not of course prevent it from being the most awkward for some!

I wish our American friends a joyful Thanksgiving, and I wish all of you here today a productive and enjoyable conference.