Hong Kong Regulations

SECURITIES AND FUTURES (FINANCIAL RESOURCES) RULES - SECT 9

Valuation of proprietary positions, etc.

(1) A licensed corporation, for the purposes of calculating its liquid capital
and required liquid capital, shall, subject to subsection

(2), value any open position in-

   (a)  a futures contract;

   (b)  any securities;

   (c)  an options contract;

   (d)  a derivative contract;

   (e)  a leveraged foreign exchange contract;

   (f)  a foreign exchange agreement;

   (g)  an interest rate swap agreement; or

   (h)  a specified investment, entered into for its own account at market
        value.

(2) Notwithstanding subsection (1), for the purposes of calculating the
liquid capital and required liquid capital of a licensed corporation, any
reference in these Rules to the market value of the securities referred to in
this subsection shall be construed as referring to the value (including any
nil value) at which they are required to be valued under this subsection,
namely-

(a) debt securities other than a certificate of deposit, in respect of which
there is no published market price, shall be valued-

        (i)    at the average value of quotations obtained in respect of those
               debt securities from- (A) at least 2 market makers; or (B)
               where in relation to any debt securities there are less than 2
               market makers, at least 2 banks, securities dealers outside
               Hong Kong or licensed corporations, who customarily deal in
               such debt securities, or at least 2 of the persons referred to
               in this sub-subparagraph; or

        (ii)   if the quotations referred to in subparagraph (i) are not
               available- (A) in the case of long positions, at nil; or (B) in
               the case of short positions, at the face value of the debt
               securities;

   (b)  listed securities which have been suspended from trading for at least
        3 business days or ceased trading on any exchange on which the
        securities were listed, shall, unless the securities can continue to
        be traded on any other exchange on which the securities are listed, be
        valued-

        (i)    in the case of long positions, at nil; or

        (ii)   in the case of short positions, at the last closing price
               before the suspension or cessation of trading;

   (c)  certificates of deposit issued by an authorized financial  institution
        or an approved bank incorporated outside Hong Kong, in respect of
        which there is no published market price, shall be valued at the value
        quoted by the issuer.