The SFC's Steering Committee on the Enhancement of Financial Infrastructure II, chaired by Andrew Sheng, says that good progress is being made on the 1999 recommendations, and suggests a further string of changes to strengthen the competitive position of Hong Kong's markets, cut costs and improve the links between investors, brokers and banks.

The report wants complete dematerialisation of shares, and suggests linking the settlement of shares and fixed-interest securities in order to improve cash-flow management. Brokers are recommended to outsource the clearing of share transactions in order to reduce costs. Electronic links with overseas clearing and settlement entities should also be established, and cross-border trade back office functions, currently performed manually, should also be automated.

The committee also recommends that the market should establish mechanisms to allow investors to transfer collateral and borrow and lend international securities between different regional markets.

In order to progress the major changes recommended by SCEFI II, as the report is known, a forum has been set up between the government, the Hong Kong Monetary Authority, the SFC and Hong Kong Exchanges and Clearing to oversee and co-ordinate the report's implementation.