Press Release: Concerns Raised by Securities Industry Over HKEX's Insufficient Contingency Planning in "Severe Weather Trading Arrangements"
Release Date: 2024-01-24
January 24, 2024
Hong Kong Exchanges and Clearing Limited (HKEX) issued a "Consultation Paper on Severe Weather Trading of Hong Kong Securities and Derivatives Markets" to the public on November 30, 2023. As part of the financial and securities industry in Hong Kong, our association and the Federation of Trade Unions Legislative Council member Hon. Kwok Wai-keung Aaron fully support any policies and measures that positively benefit Hong Kong and the industry. However, we have reservations about this hasty and incomplete consultation. Our main concerns are as follows:
Employee Safety in Relevant Industries
Our association president, Mofiz Chan, stated that the safety of practitioners and investors is a core consideration of this proposal. We anticipate that all operations should be conducted electronically and remotely. During severe weather, we strongly discourage providing services through physical outlets. The consultation paper mentioned that various industries have sufficient experience and system support for working from home during the pandemic, which provides a foundation for market opening during severe weather. However, the reality is that during the pandemic, industries were forced to adopt home office methods to maintain basic operations. Different levels of home office arrangements were implemented, often in a rotational group format, mainly under closed-loop management, rather than a comprehensive work-from-home setup. In case of system failures or hardware issues, immediate on-site handling was required, and the management of personnel and transportation arrangements for emergency situations during severe weather is entirely different. Achieving normal trading during severe weather requires support from other industries, such as banking, securities, system equipment suppliers, and even social infrastructure like transportation and dining facilities. The increased movement of citizens might require more frequent services from various disciplines, which are societal costs to be considered. The safety of employees in other relevant industries, who may have to work outside during severe weather, will also be affected to varying degrees.
Revision of the "Business Day" Definition
Our industry department director, Wong Hoi-lok Ivan, pointed out that HKEX believes listing arrangements should proceed as usual during severe weather. As listing activities involve public fund arrangements, they inevitably link with the banking industry, which may revise the definition of "business day." Many industries currently use bank working days as a reference for employment contracts, salary arrangements, and holiday schedules. HKEX's thorough consultation with the banking industry and relevant government departments on this matter is questionable.
Operational Cost Increase Leading to Closure and System Centralization Issues
He also mentioned that cybersecurity requires institutions to invest additional resources in system and personnel capability improvements. Currently, the securities industry’s ability to implement network system security is concentrated in large financial institutions. According to market share reports of Exchange Participants in recent years, the transaction volumes in the securities industry have increasingly been dominated by Group A and Group B brokers (with Group A and B accounting for 95.69% of total transaction volume as of November 2023). Implementing market opening during severe weather may exacerbate this trend, leading to complete dominance by Group A. Small and medium-sized brokers are gradually exiting the market, reducing industry positions. Future trading will be concentrated in a few leading brokers, creating systemic risk that needs evaluation.
Responsibility Attribution Issues
Hon. Kwok Wai-keung Aaron emphasized agreement with paragraph 7 of the document, stating that all considerations should prioritize "ensuring the safety of personnel and investors." Although HKEX anticipates all operations to be conducted electronically and remotely, with strong discouragement of physical service provision, industry experience during the pandemic shows that some personnel still need to be present at the company. The consultation paper does not address commuting arrangements for these individuals.
During severe weather, most employees are expected to work from home, requiring adequate hardware support. However, is the home network secure? If system or network security incidents occur due to working from home, is the responsibility on the employee or the institution? If system issues necessitate employees working elsewhere or conducting repairs, who is responsible for missed or lost trades due to transportation issues?
HKEX's consultation concluded in January, with only a few months until July's implementation. Is there enough time to develop guidelines or amend regulations? For small and medium-sized brokers, can they hire professional technical teams in the short term to install necessary equipment for employees working from home? This is a practical issue that needs addressing; otherwise, it will affect the industry's ecology and development. The consultation paper lacks in-depth evaluation of various aspects, with many operational details unaddressed. Is HKEX being too hasty and ill-considered?
Finally, with the possible extension of the "business day" definition to banking and other related industries, we strongly urge HKEX to postpone implementing the recommendations in July to avoid giving the impression of being forced upon society. Strengthening communication with stakeholders and implementing measures only when safety is higher is necessary.
For inquiries, please contact Mr. Lam at our secretariat at 2384-2026 or email pr@hksfpa.org.
Hong Kong Securities and Futures Professionals Association
Hong Kong Exchanges and Clearing Limited (HKEX) issued a "Consultation Paper on Severe Weather Trading of Hong Kong Securities and Derivatives Markets" to the public on November 30, 2023. As part of the financial and securities industry in Hong Kong, our association and the Federation of Trade Unions Legislative Council member Hon. Kwok Wai-keung Aaron fully support any policies and measures that positively benefit Hong Kong and the industry. However, we have reservations about this hasty and incomplete consultation. Our main concerns are as follows:
Employee Safety in Relevant Industries
Our association president, Mofiz Chan, stated that the safety of practitioners and investors is a core consideration of this proposal. We anticipate that all operations should be conducted electronically and remotely. During severe weather, we strongly discourage providing services through physical outlets. The consultation paper mentioned that various industries have sufficient experience and system support for working from home during the pandemic, which provides a foundation for market opening during severe weather. However, the reality is that during the pandemic, industries were forced to adopt home office methods to maintain basic operations. Different levels of home office arrangements were implemented, often in a rotational group format, mainly under closed-loop management, rather than a comprehensive work-from-home setup. In case of system failures or hardware issues, immediate on-site handling was required, and the management of personnel and transportation arrangements for emergency situations during severe weather is entirely different. Achieving normal trading during severe weather requires support from other industries, such as banking, securities, system equipment suppliers, and even social infrastructure like transportation and dining facilities. The increased movement of citizens might require more frequent services from various disciplines, which are societal costs to be considered. The safety of employees in other relevant industries, who may have to work outside during severe weather, will also be affected to varying degrees.
Revision of the "Business Day" Definition
Our industry department director, Wong Hoi-lok Ivan, pointed out that HKEX believes listing arrangements should proceed as usual during severe weather. As listing activities involve public fund arrangements, they inevitably link with the banking industry, which may revise the definition of "business day." Many industries currently use bank working days as a reference for employment contracts, salary arrangements, and holiday schedules. HKEX's thorough consultation with the banking industry and relevant government departments on this matter is questionable.
Operational Cost Increase Leading to Closure and System Centralization Issues
He also mentioned that cybersecurity requires institutions to invest additional resources in system and personnel capability improvements. Currently, the securities industry’s ability to implement network system security is concentrated in large financial institutions. According to market share reports of Exchange Participants in recent years, the transaction volumes in the securities industry have increasingly been dominated by Group A and Group B brokers (with Group A and B accounting for 95.69% of total transaction volume as of November 2023). Implementing market opening during severe weather may exacerbate this trend, leading to complete dominance by Group A. Small and medium-sized brokers are gradually exiting the market, reducing industry positions. Future trading will be concentrated in a few leading brokers, creating systemic risk that needs evaluation.
Responsibility Attribution Issues
Hon. Kwok Wai-keung Aaron emphasized agreement with paragraph 7 of the document, stating that all considerations should prioritize "ensuring the safety of personnel and investors." Although HKEX anticipates all operations to be conducted electronically and remotely, with strong discouragement of physical service provision, industry experience during the pandemic shows that some personnel still need to be present at the company. The consultation paper does not address commuting arrangements for these individuals.
During severe weather, most employees are expected to work from home, requiring adequate hardware support. However, is the home network secure? If system or network security incidents occur due to working from home, is the responsibility on the employee or the institution? If system issues necessitate employees working elsewhere or conducting repairs, who is responsible for missed or lost trades due to transportation issues?
HKEX's consultation concluded in January, with only a few months until July's implementation. Is there enough time to develop guidelines or amend regulations? For small and medium-sized brokers, can they hire professional technical teams in the short term to install necessary equipment for employees working from home? This is a practical issue that needs addressing; otherwise, it will affect the industry's ecology and development. The consultation paper lacks in-depth evaluation of various aspects, with many operational details unaddressed. Is HKEX being too hasty and ill-considered?
Finally, with the possible extension of the "business day" definition to banking and other related industries, we strongly urge HKEX to postpone implementing the recommendations in July to avoid giving the impression of being forced upon society. Strengthening communication with stakeholders and implementing measures only when safety is higher is necessary.
For inquiries, please contact Mr. Lam at our secretariat at 2384-2026 or email pr@hksfpa.org.
Hong Kong Securities and Futures Professionals Association