Hong Kong Ordinances

CLEARING AND SETTLEMENT SYSTEMS ORDINANCE - SECT 4

Monetary Authority may designate clearing and settlement systems

PART 2

DESIGNATION AND OVERSIGHT

Division 1—Designation

(1) The Monetary Authority may, by notice published in the Gazette, designate
for the purposes of this Ordinance any clearing and settlement system
described in subsection (2) if, in the opinion of the Monetary Authority, the
system is or is likely to become a clearing and settlement system whose proper
functioning is material to the monetary or financial stability of Hong Kong or
to the functioning of Hong Kong as an international financial centre.

(2) A clearing and settlement system is a system referred to in subsection (1)
if—

   (a)  it is in operation in Hong Kong; or

   (b)  it accepts for clearing or settlement transfer orders denominated in
        Hong Kong dollars, and if it is not a system that is, or is operated
        by, a company recognized as a clearing house under section 37(1) of
        the Securities and Futures  Ordinance ( Cap 571).

(3) For the purposes of subsection (1), a clearing and settlement system shall
be regarded as a clearing and settlement system whose proper functioning is
material to the monetary or financial stability of Hong Kong, or to the
functioning of Hong Kong as an international financial centre, if the
occurrence of any significant disruption to, or the presence of any
significant inefficiency in, the functioning of the system is likely to result
in the monetary or financial stability of Hong Kong, or the functioning of
Hong Kong as an international financial centre, being adversely affected; and
reference in that subsection to a clearing and settlement system that is
likely to become a clearing and settlement system whose proper functioning is
material to the monetary or financial stability of Hong Kong, or to the
functioning of Hong Kong as an international financial centre, shall be
construed accordingly.

(4) Without limiting the effect of subsection (1) or (3), the Monetary
Authority may, for the purpose of determining whether a clearing and
settlement system is or is likely to become a clearing and settlement system
whose proper functioning is material to the monetary or financial stability of
Hong Kong, or to the functioning of Hong Kong as an international financial
centre, have regard to any one or more of the following factors as they then
apply or appear likely to apply—

   (a)  the estimated aggregate value of transfer orders cleared or settled
        through the system in a normal business day;

   (b)  the estimated average value of transfer orders cleared or settled by
        the system in a normal business day;

   (c)  the estimated number of transfer orders cleared or settled by the
        system in a normal business day;

   (d)  the estimated number of participants of the system; and

   (e)  whether such system is linked to any designated system or any clearing
        and settlement system that is or is operated by a company recognized
        as a clearing house under section 37(1) of the Securities and 
        Futures Ordinance ( Cap 571).

(5) If the Monetary Authority is minded to designate a clearing and settlement
system under this section he shall—

   (a)  publish in the Gazette notice of his intention to designate the
        system, stating the grounds on which the designation is to be made;
        and

   (b)  allow such period as is specified in the notice, being a period of not
        less than 14 days, within which any system operator or settlement
        institution of the system may be heard, or may make representations,
        as to why the system should not be designated.