Hong Kong Securities Clearing Company Limited

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Any outstanding unsettled net stock positions of a Participant at the end of a settlement day are carried forward to the next settlement day and continuously netted against any opposite stock positions due for settlement in the same security. OCC would use Eligible Securities that are included in Clearing Fund contributions by Clearing Members and margin deposits of any Clearing Member that has been suspended by OCC for the repurchase arrangements. OCC Rule 1006 and OCC Rule 1104 authorize OCC to use these sources to obtain funds from third parties through securities repurchases. The officers who may exercise this authority include the Executive Chairman, Chief Executive Officer, and Chief Operating Officer.

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Transactions between CCASS participants are settled on T+2, the second trading day following the transaction. Such transactions encompass futures, options contracts, stock and bond trades, and marginmoney. In addition, clearing corporations have a range of tasks including regulating the delivery of securities and reporting trading data.

Taken together, the Commission believes that the terms of the agreement to protect OCC and its counterparties, combined with the reduced likelihood of OCC's failure to manage a default, would in fact promote the safety and soundness of the U.S. markets. Under OCC's existing Non-Bank Liquidity Facility program, OCC maintains a series of arrangements to access cash in exchange for Government securities (“Eligible Securities”) deposited by Clearing Members in respect of their Clearing Fund requirements to meet OCC's settlement obligations. Currently, the aggregate amount OCC may seek through the Non-Bank Liquidity Facility program is limited to $1 billion. Through this Advance Notice, OCC is proposing to remove the $1 billion funding limit and increase the capacity of its Non-Bank Liquidity Facility to an amount to be determined by OCC's Board from time to time, based on OCC's liquidity needs at the time and a number of other factors. Instead of retaining the $1 billion funding limit for the Non-Bank Liquidity Facility program, OCC proposes to establish a target across all external liquidity resources of at least $3 billion, which is the current aggregate amount of external liquidity. OCC is not, as part of this Advance Notice, requiring its members or other market participants to provide additional or different collateral to OCC.

In September 2007, the government revealed that it had increased its stake in HKEX from 4.41 percent to 5.88 percent. According to market sources, the Government spent HK$2.44 billion to buy 15.72 million shares in the company. The stake would be held by the Exchange Fund as a "strategic asset". At HKEX we are committed to the highest standards of corporate governance and recognise that good governance is vital for the long-term success and sustainability of our business.

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