to be left to market determination. it is against this background that we have, for example, resisted suggestions that we raise the volume of exchange fund paper issuance in order merely to satisfy the market ’ s appetite. we would much prefer to see other issuers coming forward. we are anyway constrained by our currency board arrangements only to increase the outstanding quantity of exchange fund paper to reflect interest payments or in response to enduring inflows into hong kong. another aspect of debt market development which merits some discussion is the potential for retail activity. it is worth reminding ourselves that, although in several countries retail investors have historically been loyal direct holders of government or municipal paper, invariably for long - term investment rather than trading, only in the united states has there been much direct retail interest in the corporate paper market. we have been happy in hong kong to provide the means for the small investor to access exchange fund notes or mortgage corporation notes by listing them on the stock exchange, but one should acknowledge that bond markets as a whole tend to be dominated by professionals, trading on an over - the - counter basis, and we should not be surprised, therefore, if retail activity is relatively modest. this does not mean, however, that the man in the street has no need in his wealth portfolio for instruments in this section of the risk - reward spectrum. rather, because of the difficulty of making individual credit assessments and the probably relatively high transaction cost facing the small investor, he is more likely to have indirect exposure to the debt market through collective investment schemes, pensions, etc, or to keep money in a bank deposit while the bank invests in debt instruments - a growing feature of bank balance sheets nowadays as an alternative to conventional lending. mandatory provident funds are one example of such collective arrangements, and their advent in hong kong may be expected to add to the demand for good quality debt instruments. the prospect of an additional channel of demand should to some extent stimulate interest in issuance from the supply side. in sum, there are many opportunities for innovation and development in our debt markets. i have mentioned rating agencies, credit enhancement, more varieties of asset - backed securities, potential for more channelling through collective investment vehicles, the important though perhaps modest role of the direct retail investor, opportunities relating to mpfs, and so on. these are, by and large, activities for players in the banking and finance industry to follow through themselves if they see the commercial justification. i am sure that at least some of you here today

fees available from larger and more complex deals in north america. another problem is that such companies tend not to look to enhance securities with original ratings below triple b. this in turn raises questions about fundamental credit quality in the region as well as about the potentially wider role for rating agencies. another area where we might expect to see further innovation is the securitisation of pools of assets such as mortgages or receivables. we have recently witnessed the resurgence of the mortgage - backed security market in hong kong, spearheaded by the hong kong mortgage corporation. this market has the potential to develop even further if the property market recovers buoyancy. but there is also probably scope for more activity in the securitisation of such things as credit card receivables, leasing receivables and the like. these could form attractive debt securities, although, as we have seen with so many issues of securities, the existence of the securities does not necessarily mean that there is an active market in them after the initial placement or sale. thus, we are by no means standing still. but, speaking for the monetary authority itself, we see our role as confined largely to that of a catalyst for innovation or a provider of public goods in cases where market mechanisms are unable to respond effectively to an evident need - although it may in practice be difficult to define particular situations in quite such clear - cut terms. it was, for example, partly in that catalytic role that we first issued exchange fund paper a decade ago as a means of kick - starting the debt market and supplying high quality assets for liquidity management purposes, accompanied by the establishment of the central moneymarkets unit as a centralised electronic depositary for debt instruments. more recently the cmu has established electronic links with euroclear, clearstream and some other national depositaries in our own region. in some of these developments, as in the emergence of initiatives to develop internet trading in bonds, we may be seeing the beginnings of a more global and potentially more liquid and transparent market than has hitherto been typical for debt instruments. returning to the matter of the monetary authority ’ s role, we do not seek to coerce any parties to use a particular market ; nor without very sound reason to stimulate activity artificially ; nor to take a lead as issuer, investor, arranger or market - maker when others should be equally capable of fulfilling such functions ; nor ourselves to subsidise activities the viability of which ought clearly