The new trading surveillance function for OTC transactions launched by Hong Kong’s banking regulator will benefit from the connection of participants. Markit has reported that MarkitSERV, its electronic trade processing service for over-the-counter derivatives, is reporting interest rates and FX derivative trades to the trade repository operated by the Hong Kong Monetary Authority (HKMA).
The trade repository (TR) system, an initiative which comes on the back of greater transparency and efficiency in OTC transactions went live on the 10th of December.
The banking watchdog launched the new service as regulators and industry bodies have issued improved working arrangements for over-the-counter products, OTC derivatives were blamed for the downfall of leading financial institutions during the 2008 global recession.
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Kevin Gould, president of Markit and head of Markit Asia-Pacific, commented in the media briefing: “The successful launch of our reporting service to the Hong Kong Monetary Authority’s trade repository is another milestone for Markit in Hong Kong, complementing our recent connectivity to the Hong Kong Exchanges and Clearing’s OTC clearing service. We continue to work closely with customers in Hong Kong and globally to help them comply with new regulations while managing their compliance costs.”
The trade repository acts as a central library of order information, the regime was introduced after G20 leaders met to rectify the economic downturn witnessed in 2008.
According to the HKMA’s operation manual the trade repository is a centralised registry that maintains an electronic database of records of OTC derivatives transactions. The document explains: “By collecting and providing OTC derivatives transactions information to regulatory authorities, the TR plays a vital role in supporting authorities in carrying out their market surveillance responsibilities, which will help maintain stability of the financial systems. It also helps increase transparency in the market, promotes standardization and provides a level of consistency in the quality and availability of transaction data.”
Regulatory revolutions have been an important talking point for participants in the derivatives sector, new rulings have already been sanctioned in the form of SEFs and the Volcker Rule in the US. Similar arrangements are expected under EMIR and MiFID II (two) in 2014.