Reflections upon Retirement

Author Name: 
Paul Chow, Chief Executive, Hong Kong Exchanges and Clearing Limited (HKEx)

On 15 January 2010, I will be retiring from HKEx. For many people, retirement represents a point when they are able to pursue their passion or things they have missed during their career. In my case, I am very fortunate that I have found my passion in the securities market. I have enjoyed going into work everyday – and challenges I have faced in the past 40 years have made my career more interesting and meaningful. I have also had tremendous privilege and pleasure of working with my global exchange peers at the Federation Internationale des Bourses de Valeurs (FIBV) and the succeeding World Federation of Exchanges (WFE). I have learned so much by working alongside with many of the world’s most brilliant minds.

Looking back, my experience has consistently reinforced a number of my beliefs: change is to be embraced not avoided, market quality drives liquidity, and respect the market.


In an ever-evolving world, changes cannot be avoided. But if changes are properly managed and executed, they can bring about lasting benefits. Over the years, the Federation’s structure and functions have undergone meaningful transformation following evolution of the industry.

In the early days, FIBV operated somewhat like a private club. At that time, most exchanges were mutual organisations run by their own broker participants. Hence, the FIBV served more as a networking organisation for industry players to informally exchange and share views.

The industry landscape has evolved since . With the wave of demutualisation and listing of exchanges in the past decade, the industry has increasingly turned its attention to efficiency and performance. As a result, the World Federation of Exchanges (WFE) started to focus more on business issues in addition to regulatory matters. Its name was changed to WFE in 2001 to reflect the larger and more professional role the organisation plays. This change was progressively reflected in the organisation of more structured meetings, more specialised workshops and more relevant research studies. At the same time, the quality and number of members have continued to grow.

Over the last two decades, I have witnessed the creation of centralised clearing and settlement arrangements, implementation of automated trading, establishment of cross-border linkages, changes in risk management mechanism, debate over self-regulation, and consolidation of the industry through M&A activities, to name a few. Yet the changes do not stop here. More recently, the industry has been discussing about direct market access, dark pools, ATS, OTC derivatives and regulatory reforms – new issues will continue to arise, and they will become ever more complex. Let us not react by resisting change but by embracing it, and even driving it. In doing so, we must always remember to put the interests of the investing public and our stakeholders as top priority, and do what is the best for the long term benefits of the market.

Market quality

This brings me to my second point: market quality matters. Why? For simple reasons –confidence brings more investors and issuers to the market. This in turn generates liquidity and gradually helps build and maintain the critical mass necessary for an exchange’s long term success.  Therefore, while we seek to develop our businesses, we must not lose sight of the cornerstone which ensures our sustainable success – operating a market that is open, secure, fair, orderly, efficient and transparent.

The importance of confidence is well demonstrated in the recent financial crisis. The market could crumble over a short period of time when investors and market players lose confidence in one another. With the guidance of the WFE, regulated exchanges have continued to put resources in enhancing risk management measures, transparency and disclosure, and serviceability and reliability. As a result, the industry has been able to fulfil its role in providing a continuous and open market for price discovery, and hence much needed liquidity was available throughout the credit crunch.

In fact, the unique characteristics of an exchange operation, which includes rigorous regulatory oversight, information dissemination, counter-party arrangements and novation, are themselves significant in promoting transparency, lowering cost of operation, improving risk management measures, and reducing systemic risks. Some of these benefits may not be readily conveyed by alternative trading platforms or over-the-counter venues.

Over the past few decades, the change in competitive landscape has expedited innovation and technological improvements. The changes have brought about better efficiency and lower transaction costs. However, long term benefits for the financial market as a whole can only be truly achieved if all players, including incumbent exchanges, alternative trading venues, intermediaries and investors, all compete on a level playing field. This is also a message that the WFE has been advocating.

Respect the market

For many businesses today, the ability to provide products and services which meet market needs determines competitiveness and even survival. In exchanges’ unique dual role as a regulated market operator and a profit-making organisation, the bar is set even higher. We need to respect the market as we roll out new products, services and infrastructure. Very often, the interests of different stakeholders in the market may not be aligned, or a particular proposal which is beneficial to the market in the long run may be met with short term inconvenience or resistance. At the same time, certain products, services or corporate activities may be headline-catching, but may not necessarily be what the market asks for.   Therefore, exchanges need to set their focus on creating value for the long term interest of the market, listen closely to the needs of different market actors and work with them to arrive at a consensus and resolve implementation issues.

Concluding thoughts

The world has become much more globalised, and financial markets are more interlinked than ever before.  Over the years, the WFE has been instrumental in bringing together its members to discuss timely issues of common interest. I am heartened that exchanges have also been working more closely with one another. I have seen first-hand how members have generously shared their knowledge and experience across different disciplines, be it operational, technical, legal or strategic in nature. We have also been able to constructively debate and analyse issues, and agree to a coordinated approach to advance the robustness of our global capital markets.

On a personal note, I would like to thank all the members of the WFE for their ardent support, indispensable cooperation, and valuable advice extended to me not only during my tenure as a director of WFE but throughout my years with the FIBV and WFE. It has been a tremendous experience, and great pleasure working with all of them as well as colleagues of the Secretariat.

Even though I am moving onto a new chapter of my life, I am sure our friendship will continue long into the future. Thank you once again for the kind support, advice and guidance rendered to me. I hope you will continue to extend the same assistance and cooperation to the new WFE Vice Chairman, Mr Ronald Arculli.

The WFE has grown from strength to strength with every passing decade, and I wish it even greater success long into the future!

About Paul Chow

Paul Chow was appointed chief executive of Hong Kong Exchanges and Clearing Limited (HKEx) on 1 May 2003. In this capacity Mr. Chow is also an ex-officio member of the board of HKEx.

Before he joined HKEx, Mr. Chow was the chief executive, Asia Pacific ex-Japan Region, of HSBC Asset Management (Hong Kong) Limited for 6 years from April 1997 to April 2003.  From November 1991 to January 1997, Mr. Chow was the chief executive of the Stock Exchange of Hong Kong Limited and before then, he was the chief executive of Hong Kong Securities Clearing Company Limited for 2 years. From Jan 2000 to September 2001, Mr. Chow was the Chairman of the Hong Kong Investment Association.

Mr. Chow is currently a member of the Digital 21 Strategy Advisory Committee of the Government of the HKSAR, the Advisory Committee of the Securities and Futures Commission, the Standing Committee on Company Law Reform, and the Council and Court of the University of Hong Kong. He is also an appointed member of the Council of the Hong Kong Institute of Certified Public Accountants, a director of the Board of Cyberport Management Limited and the Board of World Federation of Exchanges.

Mr. Chow holds a Bachelor of Science degree in Mechanical Engineering, a Diploma in Management Studies and an MBA degree from the University of Hong Kong, and a Diploma in Finance (Distinction) from the Chinese University of Hong Kong. Mr. Chow is a Distinguished Fellow of the Hong Kong Computer Society.