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Hong Kong Consults On OTC Derivative Rules

by Mary Swire, Lowtax.net, Hong Kong
22 July, 2014

On July 18, the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) began a one-month consultation on the detailed requirements relating to the mandatory reporting and related record keeping obligations under Hong Kong's new over-the-counter (OTC) derivatives regime.

The new regulatory regime for OTC derivatives is contained in the Securities and Futures (Amendment) Ordinance 2014, which was enacted by the Legislative Council 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.

Following consultations, the proposed detailed requirements, which aim to enhance financial market stability by increasing transparency in the OTC derivatives market, are to be set out in subsidiary legislation.

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; and related record keeping obligations.

These key matters will be subject to a consultation until August 18, 2014 – the first of a series of such consultations. Interested parties are invited to submit their comments to the HKMA or the SFC on or before the deadline. An implementation timetable for the new regime will be decided when feedback on all of the proposed consultations is published.

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