About of the Consultation Summary on Sustaining Trading Amid Adverse Weather Conditions
Release Date: 2024-09-11
September 11, 2024
This document serves as a reference and contains general information. It does not take into account specific circumstances and is not intended to address any applicable laws or regulations that may apply to you or your organization. Consequently, the contents herein should not replace professional advice tailored to specific situations, and neither you nor your business should depend on this document's content for decision-making.
In November 2023, the Hong Kong Stock Exchange held a public consultation concerning the continuation of trading during adverse weather conditions. After gathering extensive market feedback and integrating insights from operational testing, the Hong Kong Stock Exchange published a consultation summary in June 2024. This summary delineates key recommendations and follow-up arrangements. Furthermore, it analyzes potential risks related to network security management, liability distribution, insurance coverage, and collaboration among participants and staff during the execution of specific operations. The aim is to equip stakeholders with the necessary tools to preemptively address risks, fully comprehend potential challenges, and establish relevant management protocols to ensure a thorough review of existing policies and the smooth execution of related operations post-implementation.
I. Network Security Risk Management
The risk of network security breaches may escalate during adverse weather events. To bolster its response, the exchange is advised to implement the following measures:
- Enhance System Resilience and Backup Capabilities: Ensure that critical systems and vital data remain operational and safeguarded during extreme weather through a comprehensive disaster recovery strategy and robust data backup protocols.
- Improve Network Security Monitoring and Incident Response Plans: Strengthen real-time monitoring and anomaly detection capabilities, alongside a detailed network security incident response strategy.
- Reinforce Participants' Network Security Protocols: Consider mandating participants to elevate their network security management in accordance with standardized guidelines and maintain open lines of communication with the exchange.
- Engage in Regular Drills and Continuous Improvement: Conduct systematic simulations of network attacks to assess and refine network security response tactics.
Network security is crucial for the stable functioning of the securities trading market, which heavily relies on network information systems. Any breach could have profound repercussions, particularly during adverse weather conditions when security risks are amplified. Market participants must approach these risks with vigilance and implement preventative measures.
Severe Consequences of Network Attacks
Network attacks can result in system failures, data loss, and unauthorized access to customer accounts, leading to direct financial losses. More critically, such incidents can incite market panic, deplete liquidity, and pose systemic risks, including market crashes, which not only lead to significant losses for individual participants but also threaten the stability of the entire financial system.
Network Security Risk Management
- Infrastructure: Ensure that essential infrastructures, such as trading systems and data centers, can withstand unpredictable conditions and extreme weather.
- Identity Authentication and Authorization: Implement stringent access controls for participants and employees to safeguard sensitive information and trade secrets.
- Threat Detection and Response: Utilize advanced security monitoring and analytical systems for prompt detection and reaction to various network threats.
- Disaster Recovery Preparedness: Formulate comprehensive emergency and business continuity plans to swiftly restore critical operations in the event of an incident.
- Information Sharing and Collaboration: Foster communication and cooperation with regulatory bodies and participants to bolster the overall market's responsiveness.
In conclusion, effective network security management is paramount for ensuring the stable operation of the securities trading market. The Hong Kong Stock Exchange and its stakeholders must prioritize this aspect to adequately manage potential future challenges related to network security.
II. Liability Distribution and Insurance Coverage
Clear delineation of responsibilities among the exchange, participants, and investors is essential to effectively manage risks during adverse weather:
- Exchange Responsibilities: The exchange must ensure the stable operation of core trading and settlement systems and provide appropriate remedial actions in the event of system failures.
- Participant Responsibilities: Participants are tasked with ensuring their systems' reliability and emergency preparedness while making necessary internal arrangements to respond to adverse weather. Participants are accountable for any trading errors originating from their actions.
- Investor Responsibilities: Investors need to recognize and accept the additional risks associated with trading during adverse weather and must be adequately informed about the trading measures their brokers employ under such conditions. Investors should bear losses incurred due to natural disasters or unavoidable events. Enhancing investor education regarding these responsibilities is crucial.
- Scope of Coverage: The exchange and all stakeholders should obtain sufficient insurance coverage that encompasses losses arising from system failures, human errors, and natural disasters to safeguard all parties involved.
The allocation of liability concerning property loss, personal safety, and the responsibilities of employees engaged in securities trading during adverse weather warrants further exploration by social stakeholders.
Liability for Losses Due to Operations or Execution
Adverse weather may affect employees' working conditions, impacting the accuracy and timeliness of trading operations, which could result in economic losses for customers or the firm. Typically, this liability is borne by the securities firm, which must provide a safe and reliable working environment and the necessary technical support for employees. However, if an employee is found to have acted with gross negligence or intent, the firm may seek to hold the employee partially or fully accountable.
Personal Safety Liability
Employees may face various personal safety risks while commuting during adverse weather, such as traffic accidents or entrapment. Determining liability in these cases is complex and contingent on specific circumstances. If an employee follows company directives to work during adverse weather, the firm should assume safety responsibilities; conversely, if an employee disregards company instructions, some liability may rest with them.
Stakeholders should consider:
- Developing comprehensive emergency plans for adverse weather, including provisions for remote work and flexible hours, to mitigate safety risks for employees.
- Offering necessary safety guarantees and technical support to ensure a safe and suitable working environment for employees.
- Enhancing safety awareness training for employees, emphasizing the importance of prioritizing safety during adverse weather, and accommodating reasonable requests to refrain from working under such conditions.
- Maintaining effective communication and coordination with regulatory authorities to ensure that the company's emergency measures and liability allocations are compliant.
In summary, securities firms must thoroughly evaluate operational and personal safety risks associated with employee work during adverse weather and implement effective management strategies to minimize economic losses and legal disputes.
III. Employee Collaboration and Contract Updates
The implications and risks of remote work for employees in securities trading:
- System Access and Data Security: Remote work necessitates that employees access company systems via personal networks and devices, heightening the risk of data breaches and system intrusions. Personal devices may not be fully compatible with company security systems, raising concerns about information security.
- Continuity Management: Widespread remote work could lead to insufficient network bandwidth and system responsiveness, potentially disrupting the stable operation of trading systems. Emergency plans and business recovery strategies need further enhancement to address potential interruptions.
- Regulatory and Compliance Issues: Regulatory bodies must intensify oversight of remote trading to ensure compliance with relevant legal requirements. Working from home may introduce compliance risks for employees, including confidentiality breaches and violations of trading regulations.
- Employee Management and Training: There is a pressing need to enhance management and training for remote employees, ensuring familiarity with safety protocols and emergency measures, as well as providing adequate technical support and psychological counseling to facilitate adaptation to the home working environment.
- Designated On-Site Employees: In adverse weather, exchanges and participants should designate specific employees to report for duty as scheduled to maintain critical operations. Compensation and working conditions for these employees should be explicitly defined in advance to protect their legal rights.
Contract Clause Updates:
Exchanges and participants must revise employee contracts to include work obligations and emergency protocols during adverse weather, clearly outlining the rights and responsibilities of all parties. Additionally, investor agreements should incorporate relevant risk disclosure clauses.
- Re-signing Necessary Employment Contracts: Based on the safety measures for adverse weather, securities firms should require employees to re-sign updated employment contracts. These new contracts must clearly define the rights and obligations of both the company and employees during adverse weather, as well as the allocation of relevant responsibilities, ensuring compliance with the latest regulatory standards and thorough communication and negotiation between both parties.
- Incorporating Employee Safety Guarantee Clauses for Adverse Weather: Updated employment contracts should include safety guarantee clauses for adverse weather, covering but not limited to:
- Provision of safe transportation or accommodation support by the company during adverse weather.
- Company liability for any personal injury sustained by employees during work-related travel or while present at the company during adverse weather.
- Non-deduction of wages or penalties for employees unable to report to work on time due to adverse weather.
- Provision of necessary emergency supplies and medical support to ensure employee safety within the company.
- Clear guidelines on how employees should manage work during adverse weather, such as options for remote work or flexible hours.
- Establishing a swift communication mechanism to guarantee timely guidance and support from the company for employees.
Therefore, stakeholders should consider:
- Ensuring that the new employment contract terms are legal, compliant, and have been thoroughly discussed and agreed upon by both the company and employees.
- Promptly communicating operational arrangements during adverse weather to customers, allowing them to understand and prepare, thereby minimizing disputes.
- Strengthening communication and coordination with regulatory authorities to ensure that the company's safety measures in response to adverse weather align with regulatory requirements.
- Regularly reviewing and updating contract terms to adapt to the evolving market environment and regulatory requirements.
- Through re-signing employment contracts that include safety provisions for adverse weather, stakeholders can comprehensively protect employee rights, mitigate operational risks, and maintain market order.
By thoughtfully considering these recommendations, we anticipate that the Hong Kong Stock Exchange will sustain efficient market operations during adverse weather while effectively safeguarding the legitimate rights and interests of all stakeholders, thereby contributing to the long-term development of the Hong Kong financial market.
Hong Kong Securities and Futures Professionals Association
This document serves as a reference and contains general information. It does not take into account specific circumstances and is not intended to address any applicable laws or regulations that may apply to you or your organization. Consequently, the contents herein should not replace professional advice tailored to specific situations, and neither you nor your business should depend on this document's content for decision-making.
In November 2023, the Hong Kong Stock Exchange held a public consultation concerning the continuation of trading during adverse weather conditions. After gathering extensive market feedback and integrating insights from operational testing, the Hong Kong Stock Exchange published a consultation summary in June 2024. This summary delineates key recommendations and follow-up arrangements. Furthermore, it analyzes potential risks related to network security management, liability distribution, insurance coverage, and collaboration among participants and staff during the execution of specific operations. The aim is to equip stakeholders with the necessary tools to preemptively address risks, fully comprehend potential challenges, and establish relevant management protocols to ensure a thorough review of existing policies and the smooth execution of related operations post-implementation.
I. Network Security Risk Management
The risk of network security breaches may escalate during adverse weather events. To bolster its response, the exchange is advised to implement the following measures:
- Enhance System Resilience and Backup Capabilities: Ensure that critical systems and vital data remain operational and safeguarded during extreme weather through a comprehensive disaster recovery strategy and robust data backup protocols.
- Improve Network Security Monitoring and Incident Response Plans: Strengthen real-time monitoring and anomaly detection capabilities, alongside a detailed network security incident response strategy.
- Reinforce Participants' Network Security Protocols: Consider mandating participants to elevate their network security management in accordance with standardized guidelines and maintain open lines of communication with the exchange.
- Engage in Regular Drills and Continuous Improvement: Conduct systematic simulations of network attacks to assess and refine network security response tactics.
Network security is crucial for the stable functioning of the securities trading market, which heavily relies on network information systems. Any breach could have profound repercussions, particularly during adverse weather conditions when security risks are amplified. Market participants must approach these risks with vigilance and implement preventative measures.
Severe Consequences of Network Attacks
Network attacks can result in system failures, data loss, and unauthorized access to customer accounts, leading to direct financial losses. More critically, such incidents can incite market panic, deplete liquidity, and pose systemic risks, including market crashes, which not only lead to significant losses for individual participants but also threaten the stability of the entire financial system.
Network Security Risk Management
- Infrastructure: Ensure that essential infrastructures, such as trading systems and data centers, can withstand unpredictable conditions and extreme weather.
- Identity Authentication and Authorization: Implement stringent access controls for participants and employees to safeguard sensitive information and trade secrets.
- Threat Detection and Response: Utilize advanced security monitoring and analytical systems for prompt detection and reaction to various network threats.
- Disaster Recovery Preparedness: Formulate comprehensive emergency and business continuity plans to swiftly restore critical operations in the event of an incident.
- Information Sharing and Collaboration: Foster communication and cooperation with regulatory bodies and participants to bolster the overall market's responsiveness.
In conclusion, effective network security management is paramount for ensuring the stable operation of the securities trading market. The Hong Kong Stock Exchange and its stakeholders must prioritize this aspect to adequately manage potential future challenges related to network security.
II. Liability Distribution and Insurance Coverage
Clear delineation of responsibilities among the exchange, participants, and investors is essential to effectively manage risks during adverse weather:
- Exchange Responsibilities: The exchange must ensure the stable operation of core trading and settlement systems and provide appropriate remedial actions in the event of system failures.
- Participant Responsibilities: Participants are tasked with ensuring their systems' reliability and emergency preparedness while making necessary internal arrangements to respond to adverse weather. Participants are accountable for any trading errors originating from their actions.
- Investor Responsibilities: Investors need to recognize and accept the additional risks associated with trading during adverse weather and must be adequately informed about the trading measures their brokers employ under such conditions. Investors should bear losses incurred due to natural disasters or unavoidable events. Enhancing investor education regarding these responsibilities is crucial.
- Scope of Coverage: The exchange and all stakeholders should obtain sufficient insurance coverage that encompasses losses arising from system failures, human errors, and natural disasters to safeguard all parties involved.
The allocation of liability concerning property loss, personal safety, and the responsibilities of employees engaged in securities trading during adverse weather warrants further exploration by social stakeholders.
Liability for Losses Due to Operations or Execution
Adverse weather may affect employees' working conditions, impacting the accuracy and timeliness of trading operations, which could result in economic losses for customers or the firm. Typically, this liability is borne by the securities firm, which must provide a safe and reliable working environment and the necessary technical support for employees. However, if an employee is found to have acted with gross negligence or intent, the firm may seek to hold the employee partially or fully accountable.
Personal Safety Liability
Employees may face various personal safety risks while commuting during adverse weather, such as traffic accidents or entrapment. Determining liability in these cases is complex and contingent on specific circumstances. If an employee follows company directives to work during adverse weather, the firm should assume safety responsibilities; conversely, if an employee disregards company instructions, some liability may rest with them.
Stakeholders should consider:
- Developing comprehensive emergency plans for adverse weather, including provisions for remote work and flexible hours, to mitigate safety risks for employees.
- Offering necessary safety guarantees and technical support to ensure a safe and suitable working environment for employees.
- Enhancing safety awareness training for employees, emphasizing the importance of prioritizing safety during adverse weather, and accommodating reasonable requests to refrain from working under such conditions.
- Maintaining effective communication and coordination with regulatory authorities to ensure that the company's emergency measures and liability allocations are compliant.
In summary, securities firms must thoroughly evaluate operational and personal safety risks associated with employee work during adverse weather and implement effective management strategies to minimize economic losses and legal disputes.
III. Employee Collaboration and Contract Updates
The implications and risks of remote work for employees in securities trading:
- System Access and Data Security: Remote work necessitates that employees access company systems via personal networks and devices, heightening the risk of data breaches and system intrusions. Personal devices may not be fully compatible with company security systems, raising concerns about information security.
- Continuity Management: Widespread remote work could lead to insufficient network bandwidth and system responsiveness, potentially disrupting the stable operation of trading systems. Emergency plans and business recovery strategies need further enhancement to address potential interruptions.
- Regulatory and Compliance Issues: Regulatory bodies must intensify oversight of remote trading to ensure compliance with relevant legal requirements. Working from home may introduce compliance risks for employees, including confidentiality breaches and violations of trading regulations.
- Employee Management and Training: There is a pressing need to enhance management and training for remote employees, ensuring familiarity with safety protocols and emergency measures, as well as providing adequate technical support and psychological counseling to facilitate adaptation to the home working environment.
- Designated On-Site Employees: In adverse weather, exchanges and participants should designate specific employees to report for duty as scheduled to maintain critical operations. Compensation and working conditions for these employees should be explicitly defined in advance to protect their legal rights.
Contract Clause Updates:
Exchanges and participants must revise employee contracts to include work obligations and emergency protocols during adverse weather, clearly outlining the rights and responsibilities of all parties. Additionally, investor agreements should incorporate relevant risk disclosure clauses.
- Re-signing Necessary Employment Contracts: Based on the safety measures for adverse weather, securities firms should require employees to re-sign updated employment contracts. These new contracts must clearly define the rights and obligations of both the company and employees during adverse weather, as well as the allocation of relevant responsibilities, ensuring compliance with the latest regulatory standards and thorough communication and negotiation between both parties.
- Incorporating Employee Safety Guarantee Clauses for Adverse Weather: Updated employment contracts should include safety guarantee clauses for adverse weather, covering but not limited to:
- Provision of safe transportation or accommodation support by the company during adverse weather.
- Company liability for any personal injury sustained by employees during work-related travel or while present at the company during adverse weather.
- Non-deduction of wages or penalties for employees unable to report to work on time due to adverse weather.
- Provision of necessary emergency supplies and medical support to ensure employee safety within the company.
- Clear guidelines on how employees should manage work during adverse weather, such as options for remote work or flexible hours.
- Establishing a swift communication mechanism to guarantee timely guidance and support from the company for employees.
Therefore, stakeholders should consider:
- Ensuring that the new employment contract terms are legal, compliant, and have been thoroughly discussed and agreed upon by both the company and employees.
- Promptly communicating operational arrangements during adverse weather to customers, allowing them to understand and prepare, thereby minimizing disputes.
- Strengthening communication and coordination with regulatory authorities to ensure that the company's safety measures in response to adverse weather align with regulatory requirements.
- Regularly reviewing and updating contract terms to adapt to the evolving market environment and regulatory requirements.
- Through re-signing employment contracts that include safety provisions for adverse weather, stakeholders can comprehensively protect employee rights, mitigate operational risks, and maintain market order.
By thoughtfully considering these recommendations, we anticipate that the Hong Kong Stock Exchange will sustain efficient market operations during adverse weather while effectively safeguarding the legitimate rights and interests of all stakeholders, thereby contributing to the long-term development of the Hong Kong financial market.
Hong Kong Securities and Futures Professionals Association