was among the earliest, shortly after the uk. let me outline briefly how the mas sandbox works. the sandbox is available to both regulated financial institutions and unregulated fintech players to test innovative products and new technologies. firms entering the sandbox do not need to meet all the relevant regulatory requirements at the onset. to ensure that the consequences of any failure are contained, the experiments are conducted within agreed boundaries, such as the number of clients, scope of the activity, etc. the experiment is time - bound. if successful, the entity must exit the sandbox and fully comply with all relevant regulations if it wants to roll out the innovative product to the broader market. if the experiment fails, well, we all learn something. regulatory sandboxes not only encourage fintech innovation by providing a safe space for experimentation. they also give regulators an opportunity to learn the risks associated with new technologies and right - size regulation accordingly. in fact, the sandbox is an experiment not only for firms but for regulators as well. harnessing technology to manage risk we must also look to harnessing fintech to better regulate and supervise financial institutions and help them manage their risks. from a regulatory perspective, among the more promising applications of technology is in what is called “ regtech ”, aimed at enhancing the efficiency and effectiveness of financial firms ’ risk management and compliance. we can see regtech advancing in several areas. predictive analytics is being used in stress testing – to assess the ability of large, complex financial institutions to withstand a variety of stresses affecting different parts of the business in different geographies. cognitive computing and behavioural algorithms are being used to monitor and detect suspicious trading and possible misconduct in financial institutions. machine learning capabilities can help to identify subtle patterns in behaviour, which are hard to detect using traditional data analysis. 6 / 9 bis central bankers'speeches in the future, financial regulators will increasingly harness big data to detect and prosecute misconduct, and to identify weaknesses to focus on. in a recent case, the us sec obtained a settlement against a broker - dealer for its failure to adequately train its representatives when they were selling certain complex debt instruments. custom analytics tools, instead of traditional investigative techniques, were used to sift through millions of trading records. they helped identify over 8, 000 retail customers for whom the investment in the debt instruments was inappropriate. this is how 21st century regulation and supervision should look like. strengthening cyber risk management as financial services increasingly move online and fintech becomes

and there are still many challenges facing us. the hkma has therefore embarked on a review of our debt market development with a view to identifying measures which can be adopted to help market development. on the demand side, everybody knows that the mainland of china is enjoying a rapid economic growth and business opportunities are mushrooming. the recent announcement by the mainland authorities of measures to liberalise portfolio investment outflows has marked the emergence of such kind of opportunity for hong kong. under these new rules, each chinese citizen is allowed, among other things, to invest in fixed income securities overseas within certain limits. we expect that this will help boost the demand for fixed income securities although we do not know exactly how much such investment outflows will be approved by the mainland authorities in the initial years. given our experience and achievements in financial services and the fact that we are the only international financial centre of china, i am sure that hong kong is well positioned to grasp the opportunity. apart from the initiatives and developments i just mentioned, i believe that it would be useful to highlight a few fundamental factors which make hong kong an ideal place for the bond market. the first is our free capital mobility. the absence of capital controls means that there are no restrictions on foreign enterprises using our capital markets to raise funds. foreign investors can also freely invest in our markets and easily remit the proceeds back home. secondly, our well - developed financial markets, including derivative markets, would allow issuers and investors to manage any interest rate risk or exchange rate risk effectively. thirdly, hong kong has a critical mass of financial institutions which stand ready to support issuers to tap the capital markets. hong kong is also an asset management centre thus providing a large investor base for debt instruments. last but not least, the absence of capital gains tax and interest withholding tax would also favour bond market development. our exceptional geographical, cultural and language advantages also make hong kong an ideal place to link up the mainland of china with the rest of world. on our part, the hkma will continue to play a leading role in enhancing the development of the debt market in hong kong, by removing market frictions and unnecessary restrictions, and by keeping up with the best practices adopted in other well - developed markets. lastly, i would like to thank euromoney again for inviting me to speak. i look forward to the continued cooperation with our partners on the healthy development of the bond market in this region. thank you.