The big stockbrokers will pay a combined HK$4.7 billion to establish new safety nets against the risk of a broker collapse as the stock exchange implements controversial new margin and guarantee fund requirements from as early as September.
Charles Li Xiaojia, chief executive of Hong Kong Exchanges and Clearing said that although some medium-sized brokers still oppose the reform, most accepted the change so the exchange would move the plan ahead in the third quarter, most likely in September.
'Our market has grown substantially in the past two decades but our risk management has not changed accordingly. We are lagging behind the other markets and we need to catch up,' Li said yesterday as he announced implementation of the reform after a three-month consultation showed 70 per cent of 626 respondents support the measures.
'The new margin requirement and guarantee funds will make some brokers unhappy as they need to pay more money. But Hong Kong needs to impose the same requirements to catch up with the international practice.'
Li added that the new requirement matched international IOSCO standards set in 2004 which require all stock markets to have risk management measures against extremely volatile markets and a big broker collapse. Britain and the United States also require brokers to pay the margin fund or guarantee funds.
At present, Hong Kong only requires futures brokers to pay margin funds to the stock exchange, but not stockbrokers.