Hong Kong Regulations

SECURITIES AND FUTURES (FINANCIAL RESOURCES) RULES - SECT 6

Liquid capital requirement for licensed corporations

(1) For the purposes of section 4, a licensed corporation shall at all times
maintain liquid capital which is not less than its required  liquid capital.

(2) Subsections (3) and (4) apply in respect of a licensed corporation
licensed for one or more of the following-

   (a)  Type 1 regulated activity;

   (b)  Type 2 regulated activity;

   (c)  Type 3 regulated activity;

   (d)  Type 8 regulated activity, unless it is-

   (e)  in the case of paragraph (a), an approved introducing agent or a
        trader;

   (f)  in the case of paragraph (b), an approved introducing agent, a trader
        or a futures non-clearing dealer; or

   (g)  in the case of paragraph (c), an approved introducing agent.

(3) Subject to subsection (4)-

   (a)  on any particular business day on which a licensed corporation's
        required liquid capital rises above its liquid capital; and

   (b)  where applicable, on any one or more consecutive business days
        immediately following the day referred to in paragraph (a) on which
        there continues to be a required liquid capital deficit, the licensed
        corporation will be regarded as having complied with subsection (1)
        if-

   (c)  it is entitled to draw down an amount not less than the
        required liquid capital deficit under an
        approved standby subordinated  loan facility; and

   (d)  its required liquid capital on the day that its required liquid 
        capital rises above its liquid capital is at least 20% more than its
        required liquid capital at the close of business on the previous
        business day, as a result of-

        (i)    an increase in its adjusted liabilities which is attributable
               to an increase in its dealings in securities for its clients;

        (ii)   an increase in the aggregate of the initial margin 
               requirements, or of the amounts of margin required to be
               deposited, in respect of outstanding futures contracts or
               outstanding options contracts held by it on behalf of its
               clients;

        (iii)  an increase in its aggregate gross foreign currency position;

        (iv)   an increase in its adjusted liabilities which is attributable
               to an increase in the aggregate of the amounts receivable from
               its margin  clients; or

        (v)    where applicable, the aggregate of the increases described in 2
               or more of subparagraph (i), (ii), (iii) or (iv).

(4) Subsection (3) only applies on a day referred to in subsection

(3)(a) or (b) if, during the 60 days immediately preceding that day, the
required liquid capital of the licensed corporation has exceeded its
liquid capital on 4 or less business days.