The Stock Exchange of Hong Kong is assessing the introduction of an electronic share application (ESA) system that would minimise paper shuffling and lower the cost of new issues. Although the exchange has yet to decide which system it will use, early studies favour a multi-mode model designed to meet the needs of small, regular and large investors. Under the proposed system small investors, who account for up to 60 per cent of the subscription base for new issues, could apply for shares using their bank machines, mobile phones or the Internet. Banks and other financial institu tions would take responsibility for building the computer networks to buy shares and settle payments electronically. 'Financial institutions are best positioned to offer EPI [electronic payment instruction] for share applications,' the exchange's Consultative Paper on Electronic Share Applications said. 'The proposed model will enable share registrars, receiving banks and other banks to streamline and automate their work considerably.' The ESA proposal is part of the exchange's overall restructuring to establish straight-through processing and integrate trading and settle ment systems with its members' offices. The exchange estimates up to 12 per cent of the total listing cost for a small issue is consumed in printing, share registration and bank charges. Memories of the 1997 bull market also brought the current system's shortcomings to light: of the 82 companies that listed on the exchange that year, 10 were more than 300 times oversubscribed. The rush for popular issues such as Beijing Enterprise Holdings led to long queues at collection centres, a shortage of application forms and put pressure on the inter-bank money market.
