The Securities & Futures Commission, Hong Kong Exchanges & Clearing and the Federation of Share Registrars have jointly issued a consultation paper on a proposed operational model to introduce a scripless securities market.

The scripless regime will allow investors to hold and transfer securities electronically in their own names and will be implemented gradually, allowing investors to switch from physical certificates to paperless securities at their own pace.

Issuers of initial public offerings will be able to offer a scripless option. When the market is ready some years later the public will be consulted again to make the regime compulsory.

The key features of the proposed model include:

* investors can choose to hold their securities in scripless or paper form, in their own name or in the name of a nominee, in an account they can control directly, or through an account controlled by their brokers, banks or custodians;

* all scripless securities will be held inside the Central Clearing & Settlement System while all paper securities will be held outside it. An uncertificated sub-register will record all holdings in the system and a certificated sub-register will record all holdings outside it; and,

* to the extent possible, the regime will also apply to shares and debentures of overseas companies listed in Hong Kong.

It is believed by enabling investors to hold securities in their own names shareholder transparency will be enhanced while investors can enjoy the full benefits of ownership.

With the reduced need for paper documentation, opportunities for straight-through processing will open up, thus enhancing market efficiency while promoting environmental protection.

The commission's Chief Executive Officer Martin Wheatley said: "The new model will set the foundation for how scripless securities are implemented in Hong Kong. This will strengthen our market infrastructure and facilitate the long-term development of Hong Kong's financial markets."