HKAOB held its formation ceremony at the Pacific Place Center on October 18th 2001. The event was well attended by representatives from the financial community, government officials and members of the press. Below is the opening speech by HKAOB’s chairman, Mr Peter Wong:


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Ms Au King Chi, Mr Andrew Sheng, Mr Lawrence Fok, distinguished guests, ladies & gentlemen,

Good afternoon.

First, I would like to thank you for taking time off your busy schedule to attend this ceremony. I am particularly grateful to Mr Andrew Sheng, Chairman of Securities and Futures Commission, who has kindly agreed to officiate the formation ceremony and to give us a speech later.

Today we gather here to witness the formation of the Association not only because it is important to us, we believe it is equally important to the development of Hong Kong as an international financial centre as a whole.

The HKAOB is established to promote and advance the interest of online securities industry with the aims to promote quality online service and to develop a user-friendly online environment in Hong Kong.

The just released SFC Retail Investor Survey pointed to the fact that only 10% of retail investors had used online trading. This scenario does not change our conviction that online trading will certainly take root and will grow from strength to strength as soon as the market correction is over. The low take-up rate of online trading has two contributing factors. Firstly, it takes a bit of time for online service providers to come up with quality service solutions. Secondly in a slow market, retail investors could not differentiate the service standard between online and offline trading. More importantly we need to educate the investors on the ever-growing value online trading may offer.

The rapid growth in market share of online trading in the United States and the success story in Korea where over 50% of its securities trading was executed through online channel bear witness to the great potential available to online service providers. Close to our border, online trading now accounted for 5.5% of the market turnover in August in China. From whatever perspective, this growing trend of online trading requirement is irreversible and I would like to take this opportunity to call upon operators, regulators and exchanges to work closely to ensure an efficient, stable and secured online market environment is maintained for the benefit of the investors.

Today I am happy to announce that 12 online brokers have joined the Association. They are :

1. 2cube Securities Ltd
2. CASH Financial Services Group Ltd
3. Charles Schwab Hong Kong Ltd
4. Chow Sang Sang Securities Ltd
5. E*TRADE Securities (Hong Kong) Ltd
6. Hutchison CSFBdirect Ltd
7. KGI Asia Ltd
8. Philips Securities (Hong Kong) Ltd
9. SHK Online Ltd
10. Tai Fook Securities Co Ltd
11. TD Waterhouse Investor Services (HK) Ltd
12. Tung Tai Securities Co Ltd


Thank you once again for your presence. May I now ask our Guest of Honour, Mr Andrew Sheng, to give us his speech.

Thank you.


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Below is Mr Andrew Sheng's speech

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Mr Peter Wong, Chairman, HKAOB Distinguished Guests, Ladies and Gentlemen,

I am very honoured to be invited to address to the inauguration of the Hong Kong Association of Online Brokers (HKAOB).

The formation of the HKAOB is an important milestone for the securities and futures industry to promote the online trading and to strengthen investor and intermediaries education.

HKAOB has been formed at a very opportune time. Online trading is clearly the wave of the future. It brings a number of advantages to consumers, including reduction in costs, convenience, around-the-clock trading and prompt execution. From a business point of view, it allows full electronic transactions, lowering costs, speed of transaction and reducing risks. Since the successful launch of the third generation of Automatic Matching System (AMS/3) of HKEx in October 2000, online trading is now a reality.

Having online trading and using online trading are two different matters. Our licensing statistics show that as of September 2001, there are 115 registrants who use Internet for securities and futures trading or advising. Stock Exchange data show that the proportion of online trading has grown from 4% last year to 11% of market turnover. The question that we need to ask is why is online trading so slow in gaining widespread acceptance, despite such excellent infrastructure?

Our recently published Retail Investor Survey reports that despite widespread use of Internet, dealing offline through banks and brokerages remains the most popular trading mode among retail investors in Hong Kong. Only about 10% of retail investors had traded online.

The Steering Committee on Enhancement of the Financial Infrastructure (SCEFI), which I am honoured to chair, is looking exactly at how to remove the bottlenecks to more widespread use of online trading. We believe that when more broadband facilities and content are available, and when we can offer Delivery versus Payment at both the institutional and retail level, online trading will take off. There are many technical issues to resolve, and SCEFI will tap the input of the securities and futures industry through groups, such as HKAOB, to make sure that online trading really takes off.

Despite the deflation of the technology bubble, I am confident that technology will spread very quickly in Hong Kong, especially in the securities and futures markets.

1. We have one of the best telecommunications infrastructure networks in the world. The benefits of online trading will come with new channels, new products and services as well as new features. All the elements are present for online trading to be successful in Hong Kong:

(a) Hong Kong has 263 ISPs , the densest broadband network and the Internet penetration.

(b) Mobile phone penetration is one of the highest at 61% in the world. According to AC Nielsen eRatings’ recent survey about internet activities of 28 countries, Hong Kong is ranked the 2nd in surfing hours with 12 hours per head in July, compared with first place South Korea (19 hours) and the third U.S. (10 hours).

(c) 51% of households in Hong Kong are Internet users. Cybercity is already a reality.

2. HKEx is moving ahead with a number of new initiatives, including extended trading hours and the introduction of new products. It is also strengthening its infrastructure efficiency, cost structure and service levels.

3. Already, more than half of HKEx exchange participants are using AMS/3’s networked Multiple Workstations or Brokers Supplied Systems. The new third generation CCASS/3 system for cash and derivative clearing is expected to enhance straight through processing and efficiency in trading, risk management and clearing.

Hong Kong has all the right elements for online trading to grow. The next year will be critical for the securities and futures industry. It is important that the Commission, HKAOB, HKEx and market participants continue to work together to find ways to increase liquidity in Hong Kong’s markets, expand the use of online trading and introduce successful new products to keep Hong Kong growing as an international financial centre.

We look forward to working with HKAOB and wish HKAOB every success in the future.

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