HKEx to Merge with Jockey Club
1 April 2001
Webb-site.com always aims to bring you tomorrow's news today. In an exclusive, we have learned that just over a year after its listing on its own exchange, Hong Kong Exchanges and Clearing (HKEx) is to make its first deal, an all-share merger of equals with the Hong Kong Jockey Club. The new entity will be known as the HKJOx.
Sources cited the synergies for the deal as "compulsive and compelling" - combining the public's compulsion for gambling on stocks with the compelling guaranteed returns of the Jockey Club, which takes 5% of every bet.
Inevitably, concerns are being raised that the Stock Exchange will raise the transaction levy to the same 5% from its current level of 0.01% in order to finance "continuing investment in technology". Senior HKEx executives were seen inspecting the sumptuous club houses of the not-for-profit Jockey Club and were thought to be earmarking a property in Shek O for the future HKJOx club house, where a one-time cyber-tycoon is reportedly selling his half-finished mansion and going back to university.
Sources close to the Government have indicated its blessing for the merger, and that they will reclassify "stamp duty" on shares as "betting duty", reflecting the realities of the situation. It has long been the case that Hong Kong investors duck in and out of the market to avoid the risk of being exposed to bad governance. Webb-site.com has learned that the Government, in the interests of a longer-term market and stimulating interest in the compulsory savings scheme, will rename the MPF the "Mandatory Punting Fund".
The new AMS/3 internet-ready trading system will be combined with the Jockey Club's telebetting expertise, and it will be possible to transfer funds directly from your brokerage account to your telebet account and vice versa. Settlement times for stock transactions will progressively be reduced from 2 days to 20 minutes, to coincide with the cash-settled racing market.
Each horse will be given a special 5-digit "bloodstock code" starting with "99", and the Futures Exchange is widely expected to begin making a market in bloodstock derivatives, with each contract being entitled to the cumulative 3 month winnings for a $10 bet on the horse in each race it runs.
Short-selling of individual horses will be introduced, allowing punters to bet a horse will "not win" rather than "win". The short-triple-trio bet will pick the three horses which come in the last three places in 3 specified races, and the traditional quinella (the first 2 horses in either order) will be renamed the duola because whoever named it the first time couldn't count.
Back to the Futures
On the corporate governance side, the merger marks a return to the good old "private club" days of the Stock Exchange. "It is only right that the traditions of the club be respected" said a senior Jockey Club steward who had been re-elected unopposed for the last 10 years. Directors of HKEx will be renamed "Stewards".
A new category of "voting members" will be created at HKJOx, who will elect the Stewards of the HKJOx, and the Stewards will of course select the voting members, providing "much-needed stability and continuity of management".
The 600 brokers who owned the Stock Exchange until its flotation last year will become voting members of HKJOx, in addition to the 200 voting members of the Jockey Club. Indeed, it is rumoured that the total of 800 voting members under the HKJOx will be the same as the 800-strong Selection Committee which will appoint the next Chief Executive of Hong Kong in 2002.
All other HKEx and Jockey Club shares will be converted to non-voting zero-coupon subordinated perpetual loan notes, and holders will have to sit at the back at Annual General Meetings and park at least 1 mile from the grandstands at Shatin.
Injecting a new burst of realism into the listing process, a number of veterinary surgeons will be appointed to the listing committee to help in the "vetting process" of candidates for the ill-fated GEM. At the same time, to rationalise the licensing system for intermediaries, horse trainers will be given sponsors licenses in the hope that stocks from their stable will perform better than many existing GEM stocks. The track record period for new GEM stocks will be the same as for yearlings, and the horses will be suspended when they start limping and delisted before going into "liquidation" at the glue factory. Urgent amendments will be made to the SFC Bill currently being considered by the Legislative council.
Analysts consulted by Webb-site.com viewed the pending merger as a strong positive for the HKEx, and offshore bookmakers were reportedly offering odds of 4-1 on the deal going ahead.
The deal also heralds the possibility of a new marketplace for football betting, solving the Government's concerns about increasing offshore betting. An order-driven market in the score of each match will be held on the Stock Exchange trading system, and AMS/3 will be renamed "Automated Match Scoring" system according to spokeswoman April Fu Liu-ah.
In a move towards 24-hour trading, a direct link will be formed with the American NFL, so that US Football matches can be traded here by anyone who understands the rules, or claims to. Traders expressed hopes that US football betting would be even more popular than the Nasdaq-SEHK programme for trading US stocks in Hong Kong.
© Webb-site.com, 2001
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