A LEGISLATIVE Council sub-committee working on amendments to the Leveraged Foreign Exchange Trading Bill wants introducing brokers to publicly differentiate themselves from other licensed traders. Introducing brokers act as middlemen between clients and foreign exchange traders or companies and take no positions in the market. The sub-committee is recommending that the differentiation be enforced by the Securities and Futures Commission (SFC), the stock exchange's regulatory body, rather than being enforced in the bill. The sub-committee suggests that introducing brokers should have to make clear to the public their special status as a condition of receiving a licence to operate. Michael Wu, SFC executive director, agreed with the findings of the sub-committee. ''Unlike other licensed traders, introducing brokers are not subject to counter-party risk and market risk. They will not be required to put up the same capital as back-up. The public should be informed of such a difference,'' he said. Mr Wu, however, was at odds with the sub-committee over the danger of the bill entrapping transactions between group companies whose principal business is not foreign exchange trading but which need to hedge their foreign exchange risk. ''There are international companies in Hong Kong which set up special-purpose treasury companies for tax purposes to carry out their foreign exchange hedging transactions. Since their principal business is not forex trading, they should be subject to exemption,'' he said. Although there is a clause in the bill that grants exemption to such transactions among group companies, the definition of ''limited companies'' in the bill refers only to those incorporated in Hong Kong under the Companies Ordinance. The sub-committee was undecided whether a case-by-case exemption or an across-the-board class exemption should be adopted. While the sub-committee did not want to eliminate legitimate tax practices, neither did it want to create loopholes for possible abuse. ''We will write to the Association of Corporate Treasurers to see how common is the practice before we proceed,'' Mr Wu said. After solving tax and exemption and policing issues, the sub-committee plans to study the rules which govern areas such as financial resources requirements, codes of conduct for foreign exchange traders, and the content of the trading contracts. It is hoped the bill will be presented to the Legislative Council for second and third readings before July. The bill, drafted by the SFC and Financial Services Branch, is aimed at eliminating fraudulent foreign exchange dealers. Items that have raised concern in the industry include the financial resource requirements, fit and proper criteria, and collective responsibility of directors.