First Group of Automated Trading Services Authorised

The SFC has authorised the first group of Automated Trading Services (ATS) under Part III of the Securities and Futures Ordinance (SFO).    

As of today, one company and four overseas exchanges have been authorised to provide ATS in Hong Kong.  Notices of persons authorised to provide ATS have already been gazetted (Note 1).  

The authorised entities are also listed on the Register of Automated Trading Services Authorised (ATS Register) with conditions of their respective authorisations.  The ATS Register is available on the SFC website under the section of “Intermediaries, Licensing & Investment Products – Registers”.  

“The SFO sets out a legislative framework for the approval of ATS in Hong Kong.  This framework helps to achieve our statutory regulatory objective of maintaining and promoting efficiency and competitiveness of our securities and futures industry,” said Mr Mark Dickens, Executive Director of Supervision of Markets Division. 

Depending on its mode of operations and activities, an ATS provider may seek authorisation or apply for a licence from the SFC.  

Part III of the SFO provides for SFC authorisation of ATS, which do not engage in traditional dealer activities.  The SFC can impose conditions to authorisation and to make rules for the regulation of ATS.  A failure to comply with a condition to authorisation or a contravention of a rule may constitute an offence.   

Part V applies to ATS providers who also perform traditional dealer functions.  Under Part V of the SFO, ATS constitute one of nine regulated activities (i.e. Type 7) and an ATS provider is required to be licensed with the SFC. All of the provisions of the SFO affecting licensed persons will normally apply (Note 2).  

The SFC has published Guidelines for the Regulation of ATS (ATS Guidelines) and developed procedures for the authorisation of ATS and handling of applications.  The ATS Guidelines set out core standards that a person providing ATS would be generally expected to meet in relation to financial resources and risk management, operational integrity, fitness, record keeping, transparency, surveillance and reporting.  The ATS Guidelines can be viewed on the SFC website under the section of “Bills, Legislation & Codes – Regulatory Handbook”.    

Ends

Notes:

1. The first group of authorised ATS providers includes:

• Bloomberg Tradebook Hong Kong Limited (Hong Kong) (who gave up its Part V dealer licence to be authorised under Part III)
• Chicago Board of Trade (U.S.)
• Chicago Mercantile Exchange Inc. (U.S.)
• New York Mercantile Exchange, Inc. (U.S.)
• SFE Corporation Limited (Australia)

 New authorisations will continue to be gazetted from time to time and will also be listed on the SFC’s ATS Register. 

2. As of end September 2003, there were 91 corporations licensed with SFC for Type 7 regulated activity to provide ATS.  Normally an intermediary is licensed for Type 1 and/or Type 2 regulated activities (dealing in securities and/or dealing in futures contracts) and if it wants to provide ATS, it will also need to be licensed for Type 7.