Joint HKMA-SFC consultation on mandatory reporting and related record keeping rules for OTC derivatives market

The Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) today began a one-month consultation on the detailed requirements relating to the mandatory reporting and related record keeping obligations under the new over-the-counter (OTC) derivatives regime.

The new regulatory regime for OTC derivatives is reflected in the Securities and Futures (Amendment) Ordinance 2014, which was enacted by the Legislative Council in April 2014.  Following consultation, the proposed detailed requirements will be set out in subsidiary legislation to be made under the new regime.  The requirements aim to enhance financial market stability by increasing transparency in the OTC derivatives market.  The proposals have been developed in line with similar reform efforts in other major financial markets, and with input from the industry. 

The key proposals cover six main areas –

-        which types of transactions will have to be reported

-        who will be subject to reporting and in what circumstances

-        what exemptions and reliefs may apply

-        reporting timeframes and applicable grace periods

-        the form, manner and contents of reports

-        related record keeping obligations

This consultation marks the first of a series of consultations on the detailed rules for implementing the new OTC derivatives regulatory regime.  

The consultation period will end on 18 August 2014. The joint consultation paper can be downloaded from the HKMA website or the SFC website. Interested parties are invited to submit their comments to the HKMA or the SFC on or before the deadline.

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Notes :   In line with global efforts, the HKMA and SFC have been developing a regulatory regime for the OTC derivatives market in Hong Kong. Subsequent to two consultation exercises (in October 2011 and July 2012), the Securities and Futures (Amendment) Ordinance 2014 was enacted in April 2014. The new legislation, which has yet to come into effect, provides a framework for introducing mandatory reporting, clearing, trading and record keeping obligations in respect of OTC derivative transactions in Hong Kong. The precise ambit of these obligations, and their related details, will be set out in rules to be made by the SFC with the HKMA’s consent and after consultation with the Financial Secretary. The consultation paper issued today is the first in a series of consultations on such obligations and details. It sets out the HKMA’s and SFC’s detailed proposals for the mandatory reporting and related record keeping obligations. A draft of the proposed rules on these obligations is also attached.

An indicative implementation time table will be included for other aspects of the regime when we publish the consultation conclusions.