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OTC derivatives regime to be updated in Hong Kong

May 02, 2019

The Securities and Futures Commission (SFC) in collaboration with the Hong Kong Monetary Authority (HMA) have issued a joint consultation proposal in regards to regulations of over-the-counter (OTC) derivatives market in Hong Kong.

The consultation paper is purposed to strengthen the regulation of the OTC market. In particular, the paper consists of various recommendations related to supervision and monitoring of marketing conduct. Recommendations, first of all, are aimed at management of specific risks related to OTC derivatives.

The regulator referring to the international standards is planning to introduce mandatory reporting obligations in Hong Kong, whereby a specific type of OTC derivative transactions should be introduced to the Hong Kong Trade Repository. "OTC derivatives transactions" will be definite widely, therefore securities, futures, structured products authorized for public offering and certain retail banking products will be excluded. According to the latest guideline, every transaction should be assigned with a unique identifier that would enable to fulfill reporting obligations.

The regulatory authorities also propose to delist 17 jurisdictions from the list of assigned domains for the masking relief of the reporting responsibility.


Aforementioned regulations would help to improve Hong Kong’s audit requirements; to stop market manipulation and fraud, as well as to ensure that the country’s reporting and clearing systems would follow the international standards.

Proposals from third parties that possibly may improve above-mentioned regulations are accepted until June 25, 2019.

The Hong Kong regulators have also improved their compliance requirements in order to enforce money-laundering rules. Earlier last month, the Hong Kong Monetary Authority imposed a HK$12.5 million ($1.6 million) fine on a major investment company.

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