the transition plans that sandie will talk about, arrc members have become more comfortable with the idea that a transition is feasible, even if the necessity of achieving it is regrettable. second, it is clear that any rate the arrc selected as a potential alternative needed to be highly robust. there would be no point in selecting a rate that might find itself quickly in the same kinds of conditions that libor is in now. in our view, the arrc has chosen the most robust rate available. in general, only overnight unsecured or secured funding markets appeared to have enough underlying transactions to produce a robust rate. the overnight treasury repo market is the largest and most active market in any tenor of u. s. rates markets. figure 2 illustrates the point : the transactions underlying the secured overnight financing rate ( sofr ), at about $ 700 billion per day or more, are much larger than the volumes in overnight unsecured markets, even much larger than estimates of the volume in treasury bills, and they dwarf the volumes in other term markets. the alternative reference rate needs to be able to stand the weight of having trillions of dollars written on it, and the arrc has definitely met this standard in choosing sofr. third, we charged the arrc with devising plans for a voluntary transition that encouraged the use of their recommended rate where appropriate. we have never told anyone that they cannot use libor. the arrc did consider whether other cash products could move from libor to the rates it evaluated, but their paced transition plan has focused on derivatives because that is where the largest gross exposures to libor are, and because it may be easier for many derivatives transactions to move away from libor to a new rate. now, however, market participants have realized that they may need to more seriously consider transitioning other products away from libor, and the arrc has expanded its work to help ensure that this can be done in a coordinated way that avoids unnecessary disruptions. sandie will discuss plans to eventually create a term reference rate, which may help to smooth any transition. that term reference rate would have to be built by first developing futures and ois markets that reference sofr. it will likely never be as robust as sofr itself, and so derivatives transactions will almost certainly need to be based on the overnight rate, but a term reference rate could conceivably be used in some loan or other contracts that currently reference libor. all of the

new fintech solutions which involve the collaboration of multiple parties and are intended to be commonly adopted in the industry. a good example is biometric authentication. new concepts in various facial or voice recognition techniques could be demonstrated by the developers in the fintech innovation hub to gather feedback from potential users and to receive regulatory guidance from supervisors at an early stage. this should help shorten the time - to - market of useful industry - wide solutions. second, i envisage that the fintech innovation hub will also benefit the hkma. in this place, we could explore with innovators options and possibilities of using new technologies, such as big data analytics and other “ regtech ” initiatives, to achieve our objectives bis central bankers ’ speeches more effectively without creating undue risks or burden for our internal systems or databases. fintech supervisory sandbox 16. meanwhile, there is also a quite commonly - held perception that the development of fintech in the financial services sector in hong kong has been slow. i do not subscribe to this view, at least insofar as the banking sector is concerned. in the past few months, banks and stored value facility operators have already launched new payment facilities built on smart phones and near field communication technology. these facilities have the potential of altering fundamentally the way consumers make payments. many banks have also reported to the hkma their intention to roll out very soon new technology with a view to providing more secure and efficient services to customers. i mentioned earlier biometrics authentication technology involving voiceprints and fingerprints. this is indeed something that many banks are planning to roll out. additionally, blockchain, robotics and augmented reality are also being explored by banks to improve their services or streamline their operations. 17. to further support the development of fintech in the banking sector, i am pleased to announce today the launch of hkma ’ s second initiative, which is the “ fintech supervisory sandbox ”. this sandbox allows banks to conduct testing and trial of newly developed technologies and applications on a pilot basis. within the sandbox, banks can try out their new fintech products without the need to achieve full compliance with the hkma ’ s usual supervisory requirements. this will enable banks to gather real - life data and user feedback on their fintech products or services more easily and in a controlled environment, so that they can make suitable refinements to their products before the full launch. the hkma does not intend to stipulate an exhaustive list