SFC Updates its OTC Derivatives Regulation
- Legal entity identifiers will not become mandatory but their use will expand
The Securities and Futures Commission (SFC), a Hong Kong regulator, announced the conclusion of its consultation on over-the-counter (OTC) derivatives regulation. OTC derivatives Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term has been in place within the East Asian jurisdiction since 2016.
The SFC launched a consultation back in March of 2018 which had a number of purposes. These included proposals to mandate the use of legal entity identifiers (LEIs) - a code which identifies an entity in a transaction - expand firms’ clearing obligations and enforce a trading determination process for introducing a platform trading obligation.
Following on from the consultation, the SFC has decided not to make LEIs mandatory entirely. Instead, only the entity on the reporting side of a transaction will have to use an LEI. This new regulation will be enforced starting on April 1st of 2019, leaving firms with under a year to ensure they are compliant.
Changes to transaction reporting
With regard to transaction reports, reporting entities must continue to identify their counterparties in transaction reports. Reporting entities must also “establish a process to request LEIs from their clients.” The SFC did not detail a framework for this process or how it could be set up.
The clearing obligation put on firms will also be expanded. In today’s announcement, the SFC noted that firms’ clearing obligation would be expanded to include specifically standardized interest rate Swaps Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Read this Term denominated in Australian dollars and the list of firms included under the regulation’s definition of Financial Services Provider will also be expanded.
The Securities and Futures Commission (SFC), a Hong Kong regulator, announced the conclusion of its consultation on over-the-counter (OTC) derivatives regulation. OTC derivatives Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term has been in place within the East Asian jurisdiction since 2016.
The SFC launched a consultation back in March of 2018 which had a number of purposes. These included proposals to mandate the use of legal entity identifiers (LEIs) - a code which identifies an entity in a transaction - expand firms’ clearing obligations and enforce a trading determination process for introducing a platform trading obligation.
Following on from the consultation, the SFC has decided not to make LEIs mandatory entirely. Instead, only the entity on the reporting side of a transaction will have to use an LEI. This new regulation will be enforced starting on April 1st of 2019, leaving firms with under a year to ensure they are compliant.
Changes to transaction reporting
With regard to transaction reports, reporting entities must continue to identify their counterparties in transaction reports. Reporting entities must also “establish a process to request LEIs from their clients.” The SFC did not detail a framework for this process or how it could be set up.
The clearing obligation put on firms will also be expanded. In today’s announcement, the SFC noted that firms’ clearing obligation would be expanded to include specifically standardized interest rate Swaps Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Read this Term denominated in Australian dollars and the list of firms included under the regulation’s definition of Financial Services Provider will also be expanded.