A merged exchange is expected to be able to maintain a healthier bank balance, as most brokers want to take shares in it, according to Charles Lee Yeh-kwong, chairman of the new entity. 'If that happens, it would mean the exchange may not need to use its reserve or a $600 million bank loan to finance cash options [to brokers] in the merger plan,' Mr Lee said. 'It would allow the new entity to maintain more financial resources to develop new products.' Hong Kong Exchanges and Clearing (HKEC) is to be set up next year with the merger of the stock and futures exchanges and their clearing houses. Under the merger, the HKEC will issue about 1.06 billion shares to buy out brokers seats in a plan under which the brokers can choose to receive 30 per cent of their entitlement in cash at $3.88 per share. If all brokers chose cash, the HKEC would need to pay out $1.34 billion. Mr Lee said the exchange would use its reserves to finance the cash option first and then take out a bank loan.