OTC Derivatives Clearing and Reporting Requirements Delayed for Hong Kong Firms

Reporting and clearing guidelines of firms regulated by Hong Kong financial regulators will begin to be implemented later this year.

The Hong Kong Monetary Authority (HKMA) and Securities and Financial Commission (SFC) have published their conclusions to implementation of new clearing and reporting requirements for OTC Derivatives. The publication of rules is part of a larger movement among global financial regulators to introduce standards related to clearing and reporting of OTC derivatives to increase transparency and reduce counterparty risk. The HKMA and SFC rules are similar to those being enacted by the EU through the European Market Infrastructure Regulation (EMIR).

Among the highlights of the Hong Kong based initiatives are a delay in their introduction. Phase 1, which includes mandatory clearing requirements and was initially set to go into effect on July 1st 2016, has been pushed back to September 2016. Similarly, Phase II of the rules, which introduces reporting requirements for OTC derivatives, is scheduled to begin on July 1st, 2017, after Hong Kong regulators initially a targeted a January 1st date.

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Other highlights are clarifications excluded assets. According to the paper, deliverable FX forwards and deliverable FX swaps are excluded from mandatory clearing of OTC derivative portfolios. In regard to the Phase II reporting, excluded is reporting for 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. (full report here)

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