In a number of ways I feel that the world’s foreign exchange and money markets may have reached something of a watershed in the past year or so. We have witnessed a reduction in the number of significant world currencies as a result of the arrival of the euro. We have also seen accelerating consolidation among the ranks of major players. These two factors have tended to reduce the volume of interbank business. Meanwhile the traditional market infrastructure is being supplemented and challenged by the emergence of new electronic trading platforms. And, while there has already been for many years a strong momentum for product innovation, the pressure to sustain profits may most recently have intensified that search. At the same time the regulators are as anxious as ever to ensure that risks are properly understood (both by themselves and by the bankers) and appropriately managed. I am sure that the MPC will play a useful role in helping the industry meet this challenge, by providing training for new practitioners and continuing its work on product development. The recent study on the feasibility and desirability of introducing overnight index swaps in Hong Kong is one good example of this work. 7. I should perhaps stop here to avoid encroaching further on the valuable time set aside for our guest speaker today. Donald Mathieson of the IMF is no stranger to Hong Kong. Many of you will be familiar with the authoritative reports and analysis of financial markets that he and his colleagues produce.
These efforts help to keep local practitioners abreast of what is going on in overseas markets, and of product development, as well as codes and standards. This is important in ensuring that the professionalism of market practitioners in Hong Kong can be maintained at internationally accepted levels. 5. In this connection, the MPC has recently been consulted on the draft Model Forex Guidelines prepared by an international private sector task force under the encouragement of a small group of central bank sponsors, including the HKMA. The draft Guidelines are formulated to ensure that the industry will follow the best market practices and avoid potentially problematic trading practices, such as trading at illiquid hours or spreading rumours and false information. The MPC has expressed support for the draft and will consider incorporating the proposed Guidelines into its Code of Conduct for Hong Kong practitioners. This is a very positive move. An abundance of international financial activities take place in Hong Kong. The adoption of the proposed Guidelines in Hong Kong will go a  BIS Review 3/2001  1  long way towards enhancing the integrity of our markets and sustaining the development of Hong Kong as an international financial centre. It will also contribute to greater financial stability in our domestic markets. 6. There are a number of future challenges that the forex and money markets players will have to face, including the changing landscape of the industry.