ALL hell broke loose on the trading floor of the stock exchange as the Hang Seng Index smashed through 9,000 last Monday. Red-vested floor traders sprinted across the hall to execute orders, the billboard of electronic stock prices flicked over as quick as a lizard's tongue and a posse of television cameramen and newspaper journalists gathered in the exchange lobby to capture the reactions of the elated and exhausted dealers at the day's close. Meanwhile, not 20 metres away from the melee, stock exchange chairman Charles Lee Yeh-kwong, calmly reviewed the events of a remarkable few months that has seen the Hong Kong bourse emerge as the fastest growing major stock market in the world. And he remained matter-of fact as an aide interrupted to inform him of the new 9,000 record on the index. ''It is not really the stock exchange's business to influence share price, so I'm not sure I should mention this at the cocktail,'' he joked in reference to the exchange's seventh anniversary party that evening. In a wide-ranging interview, Mr Lee looked back at the agreement to list nine authorised mainland companies in the territory, which proved the springboard for huge overseas buying interest. And he revealed new moves to develop the market. This week, Mr Lee is to write to China's vice-premier Zhu Rongji, and head of the China Securities Regulatory Commission Liu Hongru with recommendations on the type and size of listings that would be suitable for the second batch of mainland listings. He said he had been canvassing the views of fund managers on the issue in recent days. Mr Lee said he did not know how many firms would be included in the second batch. ''From my point of view, the earlier they publish the list the better because it will take the issuers at least nine months to a year to prepare themselves. If they publish the list by the end of the year, we are talking about flotations in about the third quarter of 1994.'' The next of the current batch of China firms to come to the market is giant iron and steel producer, Maanshan, with a $3.93 billion global offering. A quarter of the issue will be in Hong Kong. Mr Lee said he believed the response would be better than that for the last huge China listing, Shanghai Petrochemical, which struggled to be fully subscribed. The Shanghai Petrochemical experience set off a row among merchant bankers with Peregrine chairman Philip Tose calling for book-building to be allowed in Hong Kong, as it is in the United States. Under the book-building system, which is under consideration by the Hong Kong exchange, shares are offered to institutions with bids being accepted until all the issue is taken up. ''There is a bit of self interest there,'' said Mr Lee. ''It depends on who you are talking to. If you are talking to the man on the street, he will say no to it, he will say 'you should have more of a proportion for Hong Kong so I can apply'. ''The merchant banker will say go to New York because if you go to New York there is no risk. The US practice is different because they only talk to institutional investors, they don't talk to the public. They do road shows, they talk to fund managers, then there is a share application. If the response is good, then they will sign an underwriting agreement, if the response is bad they say 'bye-bye'.'' He added: ''It is a question of striking a balance, some shares to institutions and some shares for the public. Bearing in mind that our market is predominantly retail, you don't really want to kill that market.'' The platform for the listing in Hong Kong of mainland firms was the signing in June of a Memorandum of Regulatory Cooperation. The landmark document paved the way for regulatory supervision of China firms listed in Hong Kong. Mr Lee pointed out that the New York Stock Exchange, where mainland automotive firm Brilliance China is listed, did not have a similar agreement. ''The question is how is New York going to regulate that company. The answer is they just can't regulate. After rejecting the idea of a China Board with less stringent requirements, the stock exchange forged ahead with plans for China firms to list on the main board under existing stock exchange rules. The key areas to resolve were the adoption of international accounting standards, investor protection, enforcement and regulatory supervision. Much of the groundwork was done at a fortnight-long seminar for senior officials that the stock exchange sponsored jointly with the State Council in Beijing in September last year. Mr Lee also met with Mr Zhu several times. He found the vice premier keen for China's industries to raise capital in Hong Kong and to play by international rules. The trump card that the stock exchange chairman played was the argument that through raising capital, key industries could modernise ahead of China joining the General Agreement on Tariffs and Trade. Although the need for China to adopt international accounting standards was soon taken on board, investor protection remained a problem as China has no national securities law. The solution was to give shareholders contractual protection, in effect a contract between company and shareholder, with an arbitration panel being set up to ensure enforcement. ''In theory you can sue them in Hong Kong courts or the People's Court in China, but the question is whether the judgment can be enforceable,'' said Mr Lee. ''Our alternative is to give investors the right to go to international arbitration. China is party to conventions on arbitration, so arbitral awards are enforceable in Hong Kong and China.'' He added: ''We have now established a channel to invest in confidence in China. ''I think our major market is really to develop the H shares market. If we play that right, we can be a very big market in the world. In terms of market capitalisation, we are already number seven in the world, but we can easily move up one or two places.'' Mr Lee has set three goals for next year: to further promote H shares to international institutions; to devise a ''user-friendly'' debt securities system to attract more bonds business; and to develop the options market.