market manipulation and avoid serious market dislocations developing. so after much agonizing we acted on two fronts. first, we intervened in the stock and futures markets to deter market manipulation, by making sure that the manipulation did not pay off. second, we followed this action through with various measures to strengthen our monetary and financial systems. on the monetary side, we introduced technical measures to modify our currency board arrangements of our linked exchange rate system to make it less susceptible to manipulation. on the securities side, we are in the process of introducing a series of reform measures to lessen the potential for market dislocation. i am happy to say that our actions have been successful. there has been no indication of further market manipulation since the end of august. we have seen substantial unwinding of the short positions in our currency by the hedge funds, with considerable losses. and with the stock market having recovered substantially from the level at which we entered the market in the middle of august, more considerable losses were incurred also in their short positions in the stock index futures. much of the interest rate premium of the hong kong dollar over the us dollar has disappeared, clearly reflecting with hindsight the extent of the excessive pain that had been so mercilessly inflicted on the community by the manipulative plays. i hope you are now more sympathetic towards the controversial actions that we have taken. but in case you still have doubts, let me specifically address four accusations that have been hurled at us. the first accusation is that we were trying to jack up the market against trends dictated by fundamentals. alan greenspan used those words. but this is simply not true. we do not mind where the level of the market is, if that is what the adjustment process demands. no official view on the “ right ” market level has been taken and there never will be such a view. so if somebody shorted the market thinking that the adjustment should be deeper, and if the market did fall and he benefited from the short position, we would even congratulate him for having excellent foresight. but we are against market manipulation, specifically the manipulation of our currency market, taking advantage of our passiveness under the discipline of the rule - based currency board arrangements, to produce very high interest rates with a view to sending the stock market into a nosedive and benefiting from a short position in stock index futures. such manipulation was conducted with no regard to economic fundamentals. this presents serious risks of market disl

march, we issued two circulars to all banks in hong kong. the first one reminded them to undertake risk assessment and make preparation for the necessary transition. the second one served to clarify that genuine amendments to existing derivatives contracts which are made to give effect to interest rate benchmark reform will not be considered new contracts from the perspective of the hkma ’ s margin requirements. this removes one of the uncertainties about the transition. for the time being, we have not specified a timeline for the banks to get ready their transition plan but we will approach them at a later stage to understand their progress and readiness for the transition. hibor and honia 15. as financial institutions in hong kong are gathering pace in their preparation for the libor transition, we are also making progress in identifying an alternative reference rate for hibor. we understand market participants are keen to have forward - looking term rates to mirror the structure of hibor. therefore, the hkma conducted a feasibility study of compiling hkd term rates based on actual wholesale funding transactions by major banks. but the results showed that while transaction - based wholesale term funding rates generally followed term hibors, they exhibited a high level of daily volatility, which made them an impractical substitute for term hibors. 16. more recently, tma proposed adopting the hong kong dollar overnight index average ( honia ) as the alternative reference rate for hibor. similar to many alternate reference rates chosen in other currency areas, honia is an overnight interbank funding rate. while lacking a term structure on its own, this reference rate is robust and based purely on transaction data. 17. in early may, tma completed a consultation with the industry on several technical refinements to honia. this is part of its ongoing initiative to further enhance the robustness of its benchmarks. it is now reviewing the feedbacks received, and will consider how best to put in place the relevant enhancements. 18. when these enhancements are done, tma will work with the industry to promote development and trading of honia - based financial products. later on, it will also try to promote trading in the ois market, and hopefully develop an ois curve from honia. but this would have to depend on market conditions. 19. while honia serves as an alternative to hibor, there is currently no plan to discontinue hibor. hibor has been in place for many years and is still widely recognised by market