The Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) today released conclusions on the further consultation on mandatory reporting and related record keeping obligations under the new over-the-counter (OTC) derivatives regime (Note 1). Proposals on certain aspects of the reporting regime were revised after taking into account market feedback.
- Daily valuation reporting: The requirement to submit daily valuation reports will be deferred to a later stage after additional consultation and discussion with market participants.
- Jurisdictions for masking relief: The previously proposed list of 18 jurisdictions for masking relief will remain unchanged.
- Markets and clearing houses to be prescribed: A further 15 operations will be added to the list of markets and clearing houses to be prescribed in view of market feedback. Products traded on and cleared through these operations will not be regarded as OTC derivatives and will fall outside the new regime.
- Definition of affiliate: The term “affiliate” will be amended to expressly exclude collective investment schemes (ie, funds). This will better reflect the policy intention not to include the reporting obligation of fund managers in the current phase.
- Record keeping obligations: Records will have to be readily accessible, but they will not be required to be readily searchable and identifiable by reference to a particular transaction and counterparty. Also it will no longer be a requirement to keep records which evidence communications and instructions that result in the transaction being executed.
The revised Securities and Futures (OTC Derivative Transactions – Reporting and Record Keeping Obligations) Rules attached to the conclusions paper are gazetted today and will be tabled before the Legislative Council on 20 May 2015 for negative vetting. A set of FAQs has also been prepared to help market participants better understand how the rules operate. These remain in draft form pending enactment of the rules.
The conclusions paper and FAQs (in draft form) can be downloaded from the HKMA website or the SFC website.
- On 18 July 2014, the HKMA and the SFC commenced a one-month public consultation on the Securities and Futures (OTC Derivative Transactions – Reporting and Record Keeping Obligations) Rules. Thereafter, on 28 November 2014, the HKMA and the SFC issued the Consultation Conclusions and Further Consultation on the Securities and Futures (OTC Derivative Transactions – Reporting and Record Keeping Obligations) Rules. The further consultation, which ended on 23 December 2014, sought further views on three ancillary matters relating to (i) the reporting of valuation transaction information (including the details of this requirement and the proposed implementation timetable); (ii) the designation of a list of jurisdictions for the purpose of the masking relief; and (iii) the list of stock markets, futures markets and clearing houses to be prescribed for the purposes of defining the scope of the OTC derivatives regime.