CCASS to allow independent accounts for minimal $50 fee
Investors should be able to open independent accounts in Hong Kong's clearing system by the second half of next year for as little as $50 per month, the Central Clearing and Settlement System (CCASS) said yesterday.
The move ends concerns the proposed system would be too expensive and paves the way for widespread use of the clearing system by investors to make sure they are not being defrauded by their brokers.
It has also emerged that investors can designate a bank account to the clearing house for money transactions, eliminating the need for cash or cheques when settling trades.
The Hong Kong Clearing Co yesterday started a three-month consultation on a proposal that would allow investors to participate in the CCASS.
Clearing house chairman John Chan said under the new model, investors can: control movement of their shares in CCASS; receive evidence of their shareholdings; receive corporate information directly from listing issuers; and enjoy better legal protection of their shareholdings.
Only brokers or custodians can now open an account in the CCASS, but the collapse of several brokerages last year drew attention to difficulties with the existing system.
The failures demonstrated shares could be frozen in the system, leaving them unable to sell their stakes and also highlighted the fact investors were unable to discover if their broker had been trading their shares without their consent.
Under the new proposal, individual and corporate investors will be able to open stock accounts in CCASS and become Investor Account Holders.
Cash clients and margin clients will be permitted to use the system.
To effect stock transfers into or out of the Investor Account will require brokers to input instructions to the CCASS.
However, the CCASS will require investors to affirm the brokers' instruction by touch-tone telephone, without which the transfer cannot be performed.
'Investors may find this inconvenient, but they can authorise brokers to affirm for them or they can choose not to affirm the transfers,' Mr Chan said.
The fee charged for an Investor Account will depend on the level of demand.
If there are 1,000 accounts, the monthly payment is $300 but it will cost just $50 if the accounts increase to 40,000.
Investors will also need to pay settlement fees, a custody fee and a dividend collection fee.
Meanwhile, clearing house chief executive Stewart Shing said the CCASS would study the possibility of launching central stock lending services this year.
Reviewing CCASS's performance last year, he said $5.6 billion worth of shares were handled by the CCASS daily, compared with $3.3 billion in 1995.