The Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) today published conclusions to the proposals made in a joint consultation on introducing mandatory clearing and expanding mandatory reporting for the second stage of the over-the-counter (OTC) derivatives regulatory regime (Note 1). The conclusions paper sets out the revised proposals after taking into account market comments and feedback and seeks to further consult on the initial list of financial services providers.
Introducing mandatory clearing (phase 1 clearing)
- deferring commencement of phase 1 clearing from 1 July 2016 to 1 September 2016, subject to the legislative process;
- defining “financial services provider” by reference to a list of entities to be published in the Government Gazette and seeking views on the initial list of financial services providers by 29 February 2016;
- having a single clearing threshold which applies to all prescribed persons, whether they are incorporated locally or overseas;
- excluding both deliverable FX forwards and deliverable FX swaps from the clearing threshold calculation;
- providing a mechanism for exiting from the clearing obligation;
- exempting from the clearing obligation certain transactions resulting from a multilateral portfolio compression cycle;
Expanding mandatory reporting (phase 2 reporting)
- further deferring commencement of phase 2 reporting from 1 January 2017 to 1 July 2017, subject to the legislative process;
- narrowing the backloading requirement for transactions reported prior to phase 2 reporting so that it does not apply to transactions maturing before 1 July 2018; and
- excluding from the reporting obligation FX forwards which are entered into for the purposes of buying or selling securities in a foreign currency and which are settled within the settlement cycle for the securities.
Central counterparties who are authorized to provide automated trading services will be subject to mandatory reporting in its current form (phase 1 reporting) from 1 September 2016 to align with the commencement of phase 1 clearing (Note 2).
A separate conclusions paper on the specific data fields to be completed under phase 2 reporting will be issued shortly.
The conclusions paper can be downloaded from the websites of the HKMA or the SFC.
- On 30 September 2015, the HKMA and the SFC issued a joint consultation paper on introducing mandatory clearing and expanding mandatory reporting.
- The current phase of mandatory reporting, covering only certain interest rate swaps and non-deliverable forwards (phase 1 reporting), was implemented on 10 July 2015.