EditorialPaperless stock market the way forward for Hong Kong
The fully digital system aims to boost efficiency and strengthen the city’s competitiveness as a leading financial centre
Physical share certificates will soon be collector’s items, but let’s hope most will be worth more than the proverbial wallpaper. Some 2,600 listed companies will transition to the new system in the next five years. Those that go public after November 16 will do so digitally.
Current investors may either keep their existing paper certificates or convert them into digital records.
The world is going paperless, though not as quickly as many thought some years ago. Some uses of paper are still essential for many people, such as readers of books and newspapers. Investment records, though, are not among those. Certainly, digital storage can offer both safety and efficiency. Green activists will no doubt also support the changes.
If anything, we have been too slow in going paperless. Just consider the mountains of IPO literature that must be printed but which few people actually read. The SFC proposed digitalisation as early as 2002, but it was not a policy priority. Ahead of the launch of the scheme – formally, the uncertificated securities market regime – market players such as stockbrokers will be invited to test the system.
A clear advantage of the new system is that share certificates, once digitalised, can be fully integrated with blockchain technology and tokenisation, which the local banking and financial systems have been rapidly adopting. Eliminating paper and manual processes is a global investment market trend that Hong Kong, as a leading financial centre, can hardly escape.