Hui Chun-yu: Hong Kong will implement relevant systems for a paperless securities market within the year.

On March 18, Hong Kong Financial Services and the Treasury Bureau Director Christopher Hui replied to Legislative Council Member Kenneth Leung's question at a council meeting. He stated that Hong Kong, as an international financial center, has been promoting the Hong Kong Securities and Futures Commission and the Hong Kong Exchanges and Clearing Limited to make use of the unique advantages of "one country, two systems" in order to reform various aspects of the securities market and introduce multiple listing system optimizations to promote high-quality market development. The paperless securities market system reduces reliance on paper and manual processing, promotes straight-through processing, and enhances the efficiency and competitiveness of the Hong Kong securities market. Under the paperless securities market system, the current agent structure within the central clearing system will be retained. He mentioned that the government, along with the Securities and Futures Commission and the Hong Kong Exchanges, will work with the industry to implement the relevant system within the year. Christopher Hui stated that the Securities and Futures Commission and the Hong Kong Exchanges have been in close communication with the industry in implementing the paperless securities market system. Several measures have been put in place to assist parties including securities firms in transitioning smoothly, including: The paperless securities market will be implemented in stages, with designated securities transitioning gradually within five years from the implementation date. This will ensure that the market is prepared, smoothly integrated, and operational without interruptions. Due to the retention of the existing agent structure, many current processes will remain unchanged, with manual and paper procedures gradually being replaced by electronic processes. From the perspective of securities firms, the main changes will be in the processes for depositing and withdrawing securities, and these changes will be facilitated through optimization of systems by the Hong Kong Exchanges. The system changes required by securities firms will be relatively limited, assisting the industry in transitioning smoothly to the paperless securities market system. The Securities and Futures Commission and the Hong Kong Exchanges have been closely cooperating to provide securities firms with ample information and technical support. The Hong Kong Exchanges have issued detailed information in 2024 and 2025, providing technical guidance to market participants including securities firms and held three briefing sessions, in addition to eight seminars and ongoing training courses organized by market participants, to familiarize securities firms with the processes and prepare them accordingly. The Hong Kong Exchanges will continue to provide the latest information and hold briefing sessions, as well as arrange simulation exercises for market participants to familiarize themselves with the operation and procedures of the upgraded infrastructure. To help the market better understand and adapt to the new system, the Securities and Futures Commission and the industry will jointly conduct investor education, including further optimizing the dedicated website, providing one-stop information service, and a series of FAQs. Parties will collectively enhance publicity efforts, including through videos and briefing sessions, to help investors understand the operation of the new mechanism and the subsequent steps for participation, enhancing investor awareness and easing the workload of securities firms. He also mentioned that as some fees are no longer applicable in the paperless securities market, the Hong Kong Exchanges will adjust the fee structure to ensure that the operational costs of the market are in line with the requirements of digitization and support sustainable market development. After fully considering the feedback from the industry, the Hong Kong Exchanges have made several adjustments to the fees, aiming to alleviate the financial burden on small securities firms. This includes raising the minimum fee rate threshold for membership fees to cover more small securities firms; reducing the membership fee rate for relevant securities firms; providing a waiver for the first-year membership fee for small securities firms; and adjusting the rate of stock custody fees. Christopher Hui pointed out that the government understands that securities firms may incur costs due to the custody of delisted stocks or stocks that may require special treatment. The 2026-27 Budget has proposed that the government will continue to explore providing an off-exchange trading platform for delisted or specially treated shares. The Securities and Futures Commission and the Hong Kong Exchanges have conducted preliminary consultations with market participants in the past and have heard various opinions from the market. The Hong Kong Exchanges will continue to review the feedback and announce specific arrangements in a timely manner, seeking further input from the market.