Financial Secretary Donald Tsang Yam-kuen yesterday announced fresh measures to curb speculative activity while insisting that the Government remained committed to free-market policies. Moves to curb stock and futures market short selling, strengthen the currency board and possibly enhance capital flow monitoring were unveiled as the Government's battle against speculators hit fever pitch. 'Apart from making use of the resources under the Exchange Fund within the parameters that I announced on August 14, there will be follow-through policy measures to enhance our resilience to speculative attacks,' Mr Tsang said. 'These measures should reduce the need for market intervention.' A stock exchange source said the Trading and Settlement Committee had agreed to a Government proposal to restore the 'up-tick rule' on short selling. The move - effectively barring short sales in a falling market - would be implemented after a vote by the exchange's ruling council next week. 'I expect there would be a significant reduction on short selling volume after the rule is restored,' the source said. The rule was removed in 1996 in a bid to boost short sales. Mr Tsang said: 'We have a few specific ideas on the ways and means to tighten up on discipline in the areas of short selling and stock borrowing, and to enhance the transparency in the trading of index futures. 'Some of these ideas, if agreed by the SFC [Securities and Futures Commission] and the exchanges concerned, can be put in place very quickly, while others may take a longer time.' One stock borrower said: 'Hong Kong has been a model for securities lending in Asia. It has grown into a very liquid and successful market. If the Government changes any of the rules, I hope they don't go the wrong way.' There was also speculation amongst industry players last night that Hongkong Clearing could become the central body through which all stock lending was conducted, in a bid to improve the regulatory control of the market. A source close to the Government said an ordinance to raise the cost of trading futures contracts would be enacted. This includes increasing margin levels on Hang Seng Index futures from the $80,000 initial margin per contract at present, and may also restrict investors to using Hong Kong dollars to make margins payments. Mr Tsang said Treasury operations could also be targeted. 'There seems to some misunderstanding arising from the need to raise Hong Kong dollars ... to meet the drawdowns by the Treasury. We are considering ways in which we can improve transparency of the HKMA [Hong Kong Monetary Authority].' Standard Chartered Bank regional treasurer Stanley Wong Yuen-fai said the HKMA could announce treasury operations on screen from time to time. Mr Tsang continued: 'Another measure that we are considering is how we can address the relative small size of the Aggregate Balance of the banking system in comparison with the large unregulated capital flows.' Since the Government moved into the stock and futures markets on August 14, there has been a growing chorus of protest from brokerages, which say the action could inflict severe long-term damage on Hong Kong's reputation for free and open markets.