HONG KONG: Securities and Futures Commission Update on Reporting and Record Keeping Rules for OTC Derivatives

Friday May 15 2015

The Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) has released conclusions on the further consultation on mandatory reporting and related record keeping obligations under the new over-the-counter (OTC) derivatives regime.

Highlights include:

• Daily valuation reporting: The requirement to submit daily valuation reports will be deferred to a later stage after additional consultation and discussion with market participants.
• Jurisdictions for masking relief: The previously proposed list of 18 jurisdictions for masking relief will remain unchanged. 
• Markets and clearing houses to be prescribed: A further 15 operations will be added to the list of markets and clearing houses to be prescribed in view of market feedback. Products traded on and cleared through these operations will not be regarded as OTC derivatives and will fall outside the new regime.
• Definition of affiliate: The term “affiliate” will be amended to expressly exclude collective investment schemes (ie, funds). This will better reflect the policy intention not to include the reporting obligation of fund managers in the current phase.
• Record keeping obligations: Records will have to be readily accessible, but they will not be required to be readily searchable and identifiable by reference to a particular transaction and counterparty. Also it will no longer be a requirement to keep records which evidence communications and instructions that result in the transaction being executed.

The revised Securities and Futures (OTC Derivative Transactions – Reporting and Record Keeping Obligations) Rules attached to the conclusions paper were gazetted on 15th May 2015 and will be tabled before the Legislative Council on 20 May 2015 for negative vetting.

Click on the link above for further details.