OTC Derivatives Clearing and Reporting Requirements Delayed for Hong Kong Firms

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 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 (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.

Other highlights are clarifications excluded assets. According to the paper, deliverable FX forwards and deliverable FX 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 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)