Law on clearing and settlement systems comes into force

The Clearing and Settlement Systems Ordinance, which comes into effect today (November 4), will give statutory backing to the Hong Kong Monetary Authority's oversight of two important monetary systems and legal certainty for settlement finality.

"In doing so, the ordinance will promote the safety and robustness of Hong Kong's financial infrastructure and its financial stability," HKMA Chief Executive Joseph Yam said.

The ordinance establishes a statutory regime for the authority to designate and oversee clearing and settlement systems that are material to Hong Kong's monetary or financial stability or to its functioning as an international financial centre.

It also provides statutory backing to the finality of settlement for transactions made through systems designated under the ordinance by protecting the settlement finality from insolvency laws or any other laws.

To this end, the authority will issue a certificate of finality to designated systems meeting the safety and efficiency requirements specified in the ordinance.

Starting today, all transactions effected through the Central Moneymarkets Unit or Hong Kong Dollar Clearing House Automated Transfer System (CHATS) will enjoy statutory backing to their settlement finality.

The HKMA intends to designate the Continuous Linked Settlement (CLS) System, the US dollar CHATS and euro CHATS by the end of November, as they fulfil the designation criteria.

The authority is also prepared to issue a certificate of finality to each of these three systems after they are designated, as they also meet the safety and efficiency requirements specified in the ordinance.

The Hong Kong dollar will be ready to join the CLS System after settlement finality has been granted to the system.

Mr Yam said the participation of the Hong Kong dollar in the system, along with other major currencies, was important to Hong Kong's status as an international financial centre.

Following the ordinance's launch, an independent Clearing and Settlement Systems Appeals Tribunal has been established to hear appeals by any party who is aggrieved by a decision of the HKMA in relation to designation and related matters.

The Tribunal is chaired by a judge and consists of a panel of members who are appointed by the Chief Executive.

A Process Review Committee, composed of independent members, is being established to review processes and procedures adopted by the HKMA in making decisions relating to or affecting the designated systems in which it has a legal or beneficial interest, as compared to other systems.

Information about the ordinance and related matters is available on the HKMA's website http://www.hkma.gov.hk

Ends/Thursday, November 4, 2004