IN April 1989, when Robert Gilmore arrived in Hong Kong to work for the Securities and Futures Commission (SFC), the ordinance empowering the creation of the body had yet to be approved. In 1988, Robert Owen, who had been identified as the man to run the regulatory watchdog, and David Nendick, the then secretary for Monetary Affairs, hired a firm of headhunters to crew the SFC. Mr Gilmore was approached in January of 1989 to join the organisation. After a five-day visit to Hong Kong in February, he decided to accept the executive director appointment. 'When I came out here for a look-see I got hooked. 'I found something very interesting in the air here, just a feeling that Hong Kong had been beaten up so badly in 1987 and there was not a lot of international credibility for securities and futures markets,' he said. The job offered a challenge he could not resist. The very bad beating Hong Kong took in the Wall Street crash of October 1987 was the international black balling of Hong Kong as a securities centre after the stock and futures exchanges were shut over a four-day period amid collapsing stock markets around the world. There were individual and corporate investors who just got up and walked away from their obligations, especially in the futures market. A $2 billion lifeboat was put together by the authorities and the banks. From the international investor point of view, Hong Kong had come under pressure, like other major equity centres in the crash, and it had been found wanting. Not only that, on some important principles regarding stock trading, the territory's exchange was seen to have reneged on its obligations. A new blueprint was put together under Ian Hay Davison, a government appointee, who reported in May 1988 on what needed to be done to put the securities and futures markets back together again. 'You know there is a saying in the financial markets, once burned, shame on you, twice burned, shame on me,' said Mr Gilmore. This wall of disinterest was something the SFC needed to tackle. 'After 1987, we had a credibility problem.' He was hired because of his expertise in capital markets. Other executive directors specialised in the reformation of the regulatory structure, with everything from the listing rules, the takeover rules and buy-backs coming in for a major re-draft. In capital markets there was a need to get overseas investors back and a need to get volumes rising. Before coming to Hong Kong as a regulator, Mr Gilmore had been involved in the re-drafting or building from scratch of three stock-exchange or product-linked regulatory frameworks. Mr Gilmore began in regulation with the National Association of Securities Dealers (NASD) in July 1969 as an examiner in the Dallas, Texas, district office, at the age of 22. From Dallas, Mr Gilmore went to New Orleans and then on to Washington DC where he worked on an internal review and management audit group. He then joined an independent body to investigate NASD employee improprieties for 18 months. After 10 years at the NASD's Philadelphia office Mr Gilmore joined the Philadelphia Stock Exchange. The job was akin to being a regulatory troubleshooter. The Philadelphia exchange had not closed down for a couple of days amid a crash, but it had suffered the next worst loss of face, it had been censured by the Securities and Exchange Commission (SEC). This had never happened before and it was a big deal, said Mr Gilmore. After 18 months of work, the SEC was appeased. 'It was a complete re-build,' said Mr Gilmore. Much of it involved putting in electronic trading systems and getting top people to run the regulatory framework. On obtaining a 'clean bill of health' the next round of work began with the start of a new product designed in 1980 called currency options. After getting clearance to establish the product and SEC jurisdiction over the product, the first currency option was launched in December 1983 in British pounds. He and a consultant to the exchange, a man called Ivers Riley, now the Hong Kong Futures Exchange chief executive, travelled around the US and Europe marketing the product to investors. The Philadelphia Stock Exchange has the largest currency options trading exchange in the world. Following currency options, Mr Gilmore began from scratch, launching a new exchange in futures at the Philadelphia exchange to give market-maker access to a cheap means of hedging in-house. Mr Gilmore worked at the Chicago Mercantile Exchange before the approach from a headhunter to join the SFC. In Hong Kong, one of Mr Gilmore's first jobs was chief executive of the futures exchange. At the time people were seriously considering whether to shut the futures exchange. Turnover was tiny and by June 1990, having lost $12 million in the first half (it was projected to lose $28 million that year) there was only $35 million left in the exchange's kitty to stay alive. After being put back together following the 1990 crash, the futures exchange got a lucky break as international interest in investing in Hong Kong and China grew. The agreement to sign a memorandum of understanding to complete Hong Kong's controversial airport in late June and early July of 1990 marked the beginning of a decisive period of growing volume and increased participation. In August 1990, on the Iraqi invasion of Kuwait the futures exchange completed 6,000 contracts in a week. 'I went down to the floor and bought the floor a beer on the Friday after the market closed, having done what represented 45 days of total volume June and July.' From being written off as a financial centre with no future, Hong Kong's securities markets are now the main focus of international and regional investors. For the stock exchange, the key reforms along the way included the total re-drafting of the rules governing the exchange's listing rules and policy-making. From the market perspective, key developments at the stock exchange have been the introduction of central clearing, requiring a change in local insolvency laws, the introduction of auto-matching or automated trading followed by the launch of the H shares. At the futures exchange, the revamping of the clearing system after the 1987 crash and the growth in membership, on the back of the rehabilitation of the exchange, in the eyes of international investors has been critical. The membership has risen from less than 60 in June 1990 to more than 120 today. At the futures exchange the potential ahead is for product growth. The rolling currency spot contract is due to launch shortly followed by a link-up with the Philadelphia Stock Exchange currency options trading. 'It has been a single product exchange. We have put all our eggs in one basket and it is still an equity marketplace. What we need to look towards is currencies and debt.' At the stock exchange just down the road are stock options. 'That is the next big key. If I have got any regrets I won't be here for the stock options, in this chair. 'We started thinking about stock options in 1990. All the things we have tried to do in the borrowing and lending market and short-selling were all designed to allow stock options.' For the future, the stock exchange should be focusing on raising liquidity at home. Trying to compete with other regional markets for issues means being involved in a highly competitive market as Korea, the Philippines, Singapore and Malaysia are aggressively developing their markets. Mr Gilmore believes the exchange needs to continue evolving shareholder protection here and it needs to focus on listing mainland companies. The H-share programme has proved Hong Kong's legitimacy as a place for mainland firms to tap capital. 'The H shares have been relatively well received both in Hong Kong and around the world. 'There have been some offerings outside Hong Kong. They were successful in that stock sold but there is not much liquidity in the after market. 'I think Hong Kong is starting to demonstrate to the Chinese that this may be the right place for secondary markets in mainland company offerings.' However, Hong Kong had to be very careful that listing standards were maintained to ensure the reputation of the stock market was not hurt in any way, he said. For Mr Gilmore, his immediate future is spending a summer with his family in the United States. Rumours abound regarding what he might end up doing. It does seem likely he will return to Hong Kong in another guise. Mr Gilmore is pretty clear, though, on what he will not be doing. He will not be launching another exchange or electronic stock exchange to challenge that of the Hong Kong Stock Exchange. 'I personally am opposed to fragmenting the market place. The reason I am opposed to it is because I feel the marketplace should be there for investors regardless of size. It would be very bad if we saw this marketplace splinter.'