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March 27, 2018

HKMA and SFC issued a joint consultation paper on further enhancements to the over-the-counter (OTC) derivatives regulatory regime in Hong Kong. The paper proposes to mandate the use of a Legal Entity Identifier (LEI) for reporting obligation, expand the clearing obligation, and adopt a trading determination process for introducing a platform trading obligation. Comments are invited by April 27, 2018.

To align with global standards, all entities contained in a transaction report to be submitted to the Hong Kong Trade Repository would be required to be identified by their LEI. The timeline for implementation will be staggered for different types of entities. As the second phase of the OTC derivatives clearing regime, the regulators propose to expand the clearing obligation to specified standardized interest rate swaps denominated in Australian Dollars. The paper also sets out proposed factors for determining the products that would be appropriate for a platform trading obligation in Hong Kong.

In line with the G20 commitment to reform the OTC derivatives market, HKMA and SFC have been working on implementing a regulatory regime for OTC derivatives in Hong Kong. The regime provides for the introduction of reporting, clearing, trading, and recordkeeping obligations in respect of OTC derivative transactions. In line with other markets, the OTC derivatives regulatory regime is being implemented in phases. Phase 1 reporting came into force on July 10, 2015 and Phase 2 Reporting on July 01, 2017 while Phase 1 clearing became effective on September 01, 2016.

 

Comment Due Date: April 27, 2018

Keywords: Asia Pacific, Hong Kong, Securities, OTC Derivatives, Reporting, LEI, Clearing Obligation, SFC, HKMA

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