HONG KONG EXCHANGES AND CLEARING LIMITED

12/F One International Finance Centre, 1 Harbour View Street, Central, Hong Kong
Tel: (852) 2522 1122
Fax: (852) 2295 3106
Website: www.hkex.com.hk
E-mail: info@hkex.com.hk
May 2011

Disclaimer:
HKEx and/or its subsidiaries endeavour to ensure the accuracy and reliability of the
information contained in this booklet, but do not guarantee its accuracy and accept no
liability (whether in tort or contract or otherwise) for any loss or damage arising from any
inaccuracy or omission.

1841-1960
Hong Kong was first ceded to Britain in 1841 by the Treaty
of Chuen Pi and the Treaty of Nanking confirmed the
cession in 1842. During its first 50 years as a British colony,
Hong Kong developed from a largely uninhabited island into
a prosperous community of about 225,000 people.
The 1860s were a period of great prosperity for Hong
Kong. During this decade, the Hongkong and Shanghai
Banking Corporation (later to become HSBC) was formed
and Hong Kongs first Companies Ordinance was passed.
Securities trading had almost certainly begun in Hong Kong
after the passage of the first Companies Ordinance in 1865
which allowed the formation of companies with limited
liability.
The first formal stock exchange, the Association of
Stockbrokers in Hong Kong, was formed in 1891 to bring
order and certainty to the market. It was renamed the
Hong Kong Stock Exchange in 1914. The exchange at that
time had no Chinese members and an all-Chinese stock
exchange, the Hong Kong Sharebrokers Association, was
formed on 1 October 1921.
Following the end of the Second World War, the two
exchanges merged to form the new Hong Kong Stock
Exchange. The need for the merger was brought about
as too few members had returned after the war. Trading
was initially thin and dealing was expensive. There were no
disclosure rules and insider dealing was not uncommon.
The industrialisation of Hong Kong in the post-war period
was mainly financed by internal resources or bank loans
rather than through the stock exchange. A high level of
liquidity helped fuel a boom in property in the 1950s and led
to the rise in the value of listed companies, many of which
were substantial property owners.
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1960 1985
1960 1973
The new decade marked an era of confidence and
growth. Hong Kongs infrastructure developed rapidly and
manufacturers benefited from an inexpensive and skilled
pool of labour. There was a mushrooming of industries
and the financial sector became increasingly active. Share
issues were heavily over-subscribed and share trading
boomed in the early 1960s.
Prompted by the listing of a greater variety of companies in
different industries, the Hang Seng Index (HSI) was made
public on 24 November 1969. The index was started as an
in-house guide by Hang Seng Bank in 1964 based on the
performance of 33 representative stocks.
The rapid growth of the Hong Kong economy led to the
establishment of three other exchanges, namely, the
Far East Exchange (17 December 1969), the Kam Ngan
Stock Exchange (15 March 1971) and the Kowloon Stock
Exchange (5 January 1972). On 8 January 1973, the four
stock exchanges decided to standardise their trading
sessions.
In February 1973, the establishment of further stock
exchanges was controlled by the enactment of the Stock
Exchange Control Ordinance.
In the early 1970s new issues appeared almost daily. The
HSI kept rising and reached a high of 1774.96 points on
9 March 1973 from less than 700 points only four months
earlier. Towards the end of 1973, however, the bubble
began to burst with the HSI plunging to about 433 points.
By end of December the following year, it was 177.11
points.

1974 1985
After the stock market crash of 1973, the Securities
Ordinance and the Protection of Investors Ordinance came
into effect on 1 March 1974 to better protect investors.
In 1976, the Commodity Trading Ordinance was passed
in August and the Hong Kong Commodity Exchange was
formed on 17 December. At that time, the main products
traded on it were cotton futures, sugar futures, soybean
futures and gold futures.
In 1977, a working party to consider the unification of
the four stock exchanges was formed. As a result, the
proposed unified exchange, the Stock Exchange of Hong
Kong (Stock Exchange), was incorporated on 7 July 1980.
The governments of the United Kingdom and Mainland
China initiated talks regarding the sovereignty of Hong
Kong in 1982, which led to the eventual transfer of
sovereignty in 1997. The HSI fell to a year low of 676.30
points on 2 December 1982. Amid a crisis of confidence
stemming from uncertainties about Hong Kongs future
after 1997, the Government took measures to strengthen
the Hong Kong dollar. In 1983, the Hong Kong dollar was
linked to the US dollar at $7.80 and, a year later, in 1984,
the Sino-British Joint Declaration on the future of Hong
Kong was signed.
The Hong Kong Commodity Exchange was renamed
the Hong Kong Futures Exchange (Futures Exchange) on
7 May 1985.
As the economy continued to grow, the HSI rose to
1752.45 points by the end of 1985.

1986 1999
1986 1989
The four exchanges ceased trading after the close
of business on 27 March 1986 and the unified Stock
Exchange of Hong Kong (Stock Exchange) commenced
trading on 2 April that year.
The Futures Exchange launched its flagship product on
6 May 1986, the HSI Futures, which is still its most popular
futures product today.
In September 1986, the Stock Exchange received
full membership of the Federation Internationale des
Bourses de Valeurs (the International Federation of Stock
Exchanges, which is now known as the World Federation of
Exchanges). On 24 September, the HSI closed above 2000
points for the first time on solid buying interest from local
and overseas investors.
A long bull run took the HSI to a high of 3968.70 points
on 1 October 1987 a level not to be seen for another four
years. On 16 October 1987, Black Friday, global markets
crashed. The Monday (19 October) that followed was
known as Black Monday in Hong Kong as the market dived
to 3362.39 points at the close.
The Stock Exchange suspended trading for four days from
20 October to 23 October 1987 and trading in the
HSI Futures was also suspended. Confidence in the
market was affected and when the market reopened on
26 October, the HSI plunged about 43 per cent in one day.

After the market crash of October 1987, the Stock

Exchange underwent fundamental reform. A 22-member
Council of the Stock Exchange and a strong, professional
executive management team were established to
safeguard the interests of market participants and improve
market operations.
In March 1989, the Hong Kong Securities Clearing
Company (HKSCC) was formed to operate a central
clearing and settlement system for securities transactions.
Prior to 1989, all trades executed on the Futures Exchange
were cleared and guaranteed by contracted agents.
The Securities and Futures Commission (SFC), a statutory
body with wide-ranging powers of regulation over the
securities and futures business, was established on 1 May
1989.
On 15 May 1989, the HSI closed at 3309.64 points,
having recovered more than 75 per cent from a year
low of 1876.18 points on 7 December 1987. The Stock
Exchange continued to develop as a major international
stock exchange.
1990 1996
In the 1990s, Hong Kong started to benefit from the
opening of the Mainland market. Hai Hong Holdings
Company was the first Hong Kong-incorporated Mainland
enterprise, or red chip, to list its shares through an IPO on
the Stock Exchange in July 1992. On 15 July the following
year, the first H-share company (a Mainland-incorporated
enterprise), Tsingtao Brewery Company, commenced
trading in Hong Kong.
The range of products traded on the Stock Exchange and
the Futures Exchange continued to expand as trading
systems advanced.
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On 24 June 1992, the Central Clearing and Settlement

System (CCASS) commenced operations on a trade-fortrade basis. Continuous net settlement was implemented in
October. The launch of CCASS helped prevent settlement
backlogs and enabled the Stock Exchange to cope with
greatly increased trading with the introduction of the
Automatic Order Matching and Execution System (AMS)
the following year.
The Futures Exchange introduced HSI options on 5 March
1993 and stock futures on 31 March 1995. Stock options
contracts were introduced by the Stock Exchange in
September 1995 and trading of Rolling Forex currency
futures on the futures market started in November that
year.
The Futures Exchange introduced the first electronic
screen-based trading system, the Automated Trading
System (ATS) in November 1995. With the rapid
development in technology, securities trading was also
upgraded with AMS/2 terminals, which allowed for offfloor trading from 25 January 1996. Terminals installed in
securities brokers offices enabled them to execute trades
from their offices, in addition to the Trading Hall.
1997 1999
The collapse of the Thai baht on 2 July 1997 and the start of
the Asian Financial Crisis came a day after Mainland China
resumed sovereignty over Hong Kong.
At first, Hong Kong seemed relatively immune as
speculators bet there would be an influx of hot money from
the Mainland to boost Hong Kongs economy. On 7 August
1997, the HSI reached a high of 16820.31 points.

However, in October 1997, the Hong Kong dollar pegged

to the US dollar came under significant speculative
pressure and the HSI dropped to a low of 12967.82 points
on 20 October and then to 9766.72 points on 23 October.
As inter-bank rates continued to be volatile, the HSI
bottomed at 6544.79 points on 13 August 1998. The
Government injected about $120 billion to buy blue chips in
defence of the pegged exchange rate. The HSI rebounded
to about the 8000 level in two weeks. Subsequently, the
HSI rose steadily. The Government started to divest itself
from the position in 2001, making a significant profit in the
process.
Starting from June 1996, the Stock Exchange appointed
a working group on new market development with a brief
to explore the potential for a second board as well as
for regional products. In a related development, in 1996,
the Stock Exchange launched a consultation on marketmaking and other proposals to improve the market for
second line stocks. However, there were few and diverse
responses to the consultation, so the Stock Exchange
shelved the initiative.
The Governments drive to support the development
of technology industries and small and medium-sized
enterprises in Hong Kong brought a new impetus to the
second board idea. The Chief Executives 1998 Policy
Address supported the establishment of a venture board
for smaller and emerging technology companies stocks.
In May 1998, the Stock Exchange released a consultation
paper on a proposed second market for emerging
companies. The proposed second market was to be an
alternative market to the Main Board and would target
sophisticated investors.

On 15 November 1999, the Stock Exchange launched a

second board, the Growth Enterprise Market (GEM), to
cater for companies which did not have the necessary
profit track record to be listed on the Main Board of the
Stock Exchange. The launch of GEM in 1999 soon caught
up with the global tech boom. There was considerable
growth in so-called e-businesses and i-businesses
across the world as well as in Hong Kong, sectors
of the economy that did not exist before. Along with
its fellow second markets, GEM attracted these fastevolving sectors. The first GEM listing took place on
25 November 1999. As at the end of March 2000, the
market had attracted 18 listings, with a number of them
engaged in new-economy businesses.
Hong Kongs Financial Secretary announced in March
1999 a comprehensive reform of the securities and futures
markets to enhance Hong Kongs competitiveness in
an increasingly global financial marketplace. The reform
changed the market structure and merged the five
recognised and approved market operators in Hong
Kong the Stock Exchange, the Futures Exchange and
their respective clearing houses under a single holding
company, Hong Kong Exchanges and Clearing Limited
(HKEx).
The merger of the Exchanges was effected by way of
schemes of arrangement between the Exchanges and
their respective shareholders pursuant to which the then
existing shares of the Exchanges were cancelled and, in
consideration, the shareholders received shares in HKEx.
The required legislative provisions for effecting the merger,
including turning HKSCC into a company limited by shares
and a wholly owned subsidiary of HKEx, were provided
through the passing of the Merger Ordinance.

2000 PRESENT
The Stock Exchange, the Futures Exchange and the
HKSCC were demutualised and merged to become wholly
owned subsidiaries of Hong Kong Exchanges and Clearing
Limited (HKEx) on 6 March 2000.
Prior to the merger it was necessary to hold a share in the
Stock Exchange or Futures Exchange in order to trade
on or through its facilities. Furthermore, shareholders
in the Exchanges had certain rights attached to their
shareholdings, including voting rights at the Exchanges
general meetings. However, they had no right to participate
in the profits of the Exchanges.
As a result of the merger, the shareholders of the
Exchanges effectively exchanged their ownership rights
in the Exchanges for economic interests in HKEx and
the conventional right to receive dividends. Additionally,
the existing trading rights of the shareholders remained
unaffected with each shareholder being granted one
Trading Right on the relevant Exchange for each share of
that Exchange held immediately prior to the completion of
the merger.
The function of prudential regulation of Stock Exchange
Participants was transferred to the SFC upon the merger.
Similarly, primary responsibility for the routine inspection
of the businesses of Exchange Participants, monitoring
their compliance with conduct rules and liquid capital
requirements, and ensuring that they have proper systems
of management and control in place was transferred to the
SFC.
On 28 March 2000, the HSI reached a historical high of
18397.57 points.

HKEx became one of the first stock exchanges in the world

to go public. Its shares were listed by way of introduction on
the Stock Exchange on 27 June 2000 with the auspicious
stock code of 388.
An upgraded version of the ATS system, renamed the
Hong Kong Futures Automated Trading System (HKATS),
became the electronic trading platform for all products
traded on the Futures Exchange. Following the migration
from an open outcry system to electronic trading on 5
June 2000, floor trading on the Futures Exchange was
abolished.
MTR Corporation (MTRC) was the first government-owned
organisation to be privatised. Its shares were listed on the
Main Board on 5 October 2000.
To enhance trading and clearing systems, HKEx launched the
Third Generation Automatic Order Matching and Execution
System (AMS/3) on 23 October 2000 and introduced the new
generation of the Central Clearing and Settlement System
(CCASS/3) on 16 May 2002.
The Securities and Futures Ordinance (SFO) together with a
number of codes and guidelines came into effect on 1 April
2003. On the same day, the minimum commission rate was
abolished. Commissions were freely negotiated between
Exchange Participants and their clients.
Following the signing of the Closer Economic Partnership
Arrangement (CEPA) between Hong Kong and the
Mainland in June 2003, HKEx opened its first Mainland
representative office in Beijing on 17 November 2003.
Hang Seng China Enterprises Index (H-shares Index)
Futures and Options Contract were introduced on
8 December 2003 and 14 June 2004.

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The H shares of Bank of Communications were listed

on 23 June 2005. It was the first Mainland-incorporated
commercial bank to be listed outside the Mainland.
On 18 October 2005, the third phase of the Closer
Economic Partnership Arrangement (CEPA III) was signed
under which qualified Mainland securities and futures
companies were permitted to establish branches in Hong
Kong.
Also in October 2005, China Construction Bank
Corporation (CCB) chose to list in Hong Kong, making it the
first of the Mainlands four state-owned commercial banks
to list its shares, all of which are freely tradable. The bank
raised $71.6 billion through its initial public offering (IPO),
which was the largest in Hong Kongs history.
The Link Real Estate Investment Trust (The Link REIT) was
listed on 25 November 2005. It was the first REIT to be
listed in Hong Kong and was the largest IPO by a REIT in
the world in terms of the amount raised.
The renovated Trading Hall, featuring 294 trading booths,
became operational on 16 January 2006. The new
Exchange Exhibition Hall opened on 26 April 2006. The
Exchange Exhibition Hall is designed to help local and
overseas visitors better understand Hong Kongs securities
and derivatives markets.
On 12 June 2006, Callable Bull/Bear Contracts (CBBCs)
began trading on HKExs securities market, with seven of
them at launch.
On 11 September 2006, Hong Kong Exchanges and
Clearing Ltd. became a constituent stock of the HSI. In
addition, the number of constitutent stocks in the HSI
increased from 33 to 34, after the inclusion of CCB as
the first fully tradable H-share constituent. The number of
constituent stocks in the HSI further increased from 34
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to 39 when five other H-share constituents were added.

Sinopec Corporation and Bank of China Limited were
added on 4 December 2006, Industrial and Commercial
Bank of China Limited (ICBC) and China Life Insurance
Company Limited were added on 12 March 2007, while
Ping An Insurance Company of China Limited was added
on 4 June 2007.
Separately, HSI Services Limited announced a change in
the compilation of the HSI to be phased in from September
2006 to September 2007. The full market capitalisation
weighted formula will gradually move to a freefloat-adjusted
market capitalisation weighted formula with a 15 per cent
cap on individual stock weightings.
ICBC was the first Mainland enterprise to simultaneously list
its H shares in Hong Kong and A shares on the Mainlands
Shanghai Stock Exchange on 27 October 2006. The
combined offering marked the largest IPO ever in the world,
raising US$19.1 billion.
With the rising significance of H shares, HSI Services
Limited launched the Hang Seng China H-Financials Index
(HFI) on 27 November 2006, with eight initial constituents.
With strong economic growth in Hong Kong and Mainland
China, HKExs securities and derivatives markets
performed strongly and set new records in 2006. The HSI
reached a high of 20001 points on 28 December 2006
while the H-shares Index soared 94 per cent to end the
year at 10340 points. Trading on HKExs derivatives market
(futures and options) also soared in 2006. A total of 42.91
million futures and options contracts were traded in 2006,
a 68 per cent increase from 2005.

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HKExs Public Viewing Room on the first floor of One and

Two Exchange Square, Central opened on 8 February
2007. The room is equipped with four workstations,
which investors can use to search and view issuers
announcements, notices and other documents on the
HKEx websites, and access the website of the SFC.
HFI Futures Contract was introduced on 16 April 2007.
October 2007 was a record-setting month for Hong Kongs
securities market. The total market capitalisation, which
exceeded $10 trillion for the first time on 3 May 2006,
reached $23.197 trillion on 30 October 2007. Turnover
rose to an all-time high of $210.5 billion on 3 October 2007,
and the Hang Seng Index reached a record closing high of
31638 on 30 October 2007.
A pilot scheme requiring new listing applicants to post a
web proof information pack (WPIP) on the HKExnews or
Growth Enterprise Market website, as applicable, prior
to the issue of an initial public offering prospectus was
commenced on 1 January 2008. The pilot scheme is
intended to help level the playing field for institutional and
retail investors in the receipt of information about a listing
applicant prior to the commencement of the public offering.
The H shares of China Railway Construction Corporation
Limited were listed on 13 March 2008. It was the largest
initial public offering by total funds raised of the year locally.

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Mini H-shares Index Futures were introduced on 31 March

2008.
HKEx introduced the Closing Auction Session (CAS) in its
securities market on 26 May 2008 and suspended the CAS
with effect from 23 March 2009.
SPDR Gold Trust (stock code: 2840) was listed on the
Stock Exchange on 31 July 2008. The Exchange Traded
Fund provides a way to invest in gold in a transparent and
well-regulated market.
Trading of Gold Futures was reintroduced on 20 October
2008.
Prices in the Hong Kong securities market dropped amid
turmoil in global financial markets. The HSI fell to an
intraday low of 10676.29 on 27 October 2008.
As a result of changes effective from 1 April 2009, the
blackout period applicable to dealings in a listed issuers
shares by a director of the issuer is 60 days before the
publication of the issuers full-year results, and 30 days
before the issuers results for half-year and other interim
periods.
HKEx signed a Closer Cooperation Agreement (CCA) with
the Shanghai Stock Exchange (SSE) on 21 January 2009
and a CCA with the Shenzhen Stock Exchange (SZSE) on
8 April 2009. The agreements commit HKEx to work more
closely with the SSE and SZSE towards the common goals
of meeting the domestic and international fund-raising
needs of Chinese enterprises, and contributing to the
greater development of Chinas economy.

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HKEx was ranked number one globally in funds raised through

IPOs in 2009 with a total $248.23 billion.
On 27 January 2010, Russias United Company RUSAL, one
of the worlds largest aluminium companies, raised $17.4 billion
through a listing at HKEx. RUSALs listing was followed by the
Hong Kong IPOs of Canadas SouthGobi Resources on 29
January 2010 and Frances LOccitane International on 7 May
2010, which raised $3.06 billion and $6.11 billion respectively.
On 8 February 2010, HKExs derivatives market introduced
Flexible Index Options to expand its block trade facilitys
coverage of over-the-counter contracts.
In February 2010, HKEx announced its Next Generation
Data Centre (NGDC) project in Hong Kongs Tseung Kwan O
Industrial Estate. Hosting Services, including low-latency colocation with HKEx markets, will be offered at the NGDC. HKEx
aims to move the primary data centre for its securities market
to the NGDC in the fourth quarter of 2012.
In July 2010, Agricultural Bank of China was listed in Shanghai
and Hong Kong after raising more than US$22 billion in the
worlds largest IPO.
On 13 October 2010, Mongolian Mining raised $5.8 billion and
is the first company from Mongolia to list at HKEx.
On 29 October 2010, AIAs IPO raised more than $159 billion,
a new record high for a listing in Hong Kong.
Trading of HSI Dividend Point Index Futures and HSCEI
Dividend Point Index Futures commenced on 1 November
2010.

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On 8 December 2010, Vale, a Brazilian metals and mining

company, became the first company from the country to list in
Hong Kong and the first company to list at HKEx in the form of
depositary receipts.
On 10 December 2010, HKEx announced it planned to
establish a clearing house by the end of 2012 for derivatives
traded in Hong Kongs over-the-counter market.
On 15 December 2010, HKEx began accepting Mainland
Accounting and Auditing Standards and Mainland Audit Firms
for Mainland Incorporated Companies Listed in Hong Kong.
HKExs securities market finished first in the world in terms of
IPO funds raised for the second year in a row in 2010, when
$449.5 billion was raised through 113 new listings.
Trading in HKExs securities market was extended on 7 March
2011, when the hours were changed to 9:30 am to 4:00 pm
with a 90-minute break starting at 12 noon.
Russian President Dmitry Medvedev and his delegation visited
HKEx on 17 April 2011.
The Hui Xian REIT, the first renminbi-denominated IPO
launched in Hong Kong, made its debut on 29 April 2011. The
listing of the Hui Xian REIT paved the way for more renminbidenominated IPOs to Hong Kong.

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