The Investor Compensation Fund's new automatic levy suspension and reinstatement mechanism has been launched, the Financial Services & the Treasury Bureau says.

The Securities & Futures (Investor Compensation - Levy) (Amendment) Rules 2005 (Amendment Rules) provide that that investor compensation levy will be suspended when the net asset value of the fund exceeds $1.4 billion, and reinstated when the it falls below $1 billion, which is the minimum prudent level required to cover its potential obligations.

At the end of September, the fund's net asset value was estimated to be $1.59 billion.

The Securities & Futures Commission, responsible for administering the fund and implementing and monitoring the operation of the levy suspension and reinstatement mechanism, has already commissioned the auditing of the fund account.

Subject to receiving the auditor's report and publishing the relevant gazette notice, it is expected the exemption of the levy will become effective in mid-December.

The current investor compensation levies are set at 0.002% per securities transaction executed on the Stock Exchange, and 50 cents per futures transaction, and 10 cents for smaller sized contracts, executed on the Futures Exchange.

The bureau said suspension of the investor compensation levy will reduce the transaction cost to be borne by investors, which is conducive to the development of Hong Kong's securities and futures markets.