Consultation on Mandatory Clearing and Expanding Mandatory Reporting

The Hong Kong Monetary Authority (“HKMA”) and the Securities and Futures Commission (“SFC”) on 30 September 2015 jointly issued a consultation on introducing the first phase of mandatory clearing and the second phase of mandatory reporting under the new over-the-counter (“OTC”) derivatives regime.

According to the consultation paper, the proposals are to assist in the continual development of a regulatory regime for OTC derivatives for Hong Kong.

The first phase of mandatory clearing aims to mandate the clearing of certain standardised interest rate swaps entered into between major dealers. The proposals under the consultation identify the types of transactions that will be subject to mandatory clearing; the persons who will be subject to the clearing obligation and in what circumstances; the exemptions and reliefs that may apply; and the process for designating central counterparties for the purposes of the clearing obligation.

The second phase of mandatory reporting aims to expand the existing reporting regime. The key proposals include requiring the reporting of transactions in all OTC derivative products; widening the scope of transaction information to be reported, including requiring the reporting of daily valuations; and identifying the specific data fields to be completed under the expanded reporting regime.

The above consultation was considered by the Council with the assistance of the Investment Products & Financial Services Committee of the Law Society. The Council reviewed and endorsed the draft submission prepared by the Committee to respond to the consultation paper.

The submission can be found on the Law Society’s website: