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The Government today (February 5) gazetted six pieces of subsidiary legislation to implement phase 1 clearing and phase 2 reporting under the over-the-counter (OTC) derivatives regulatory regime.
The six pieces of subsidiary legislation are:
(1) Securities and Futures (Amendment) Ordinance 2014 (Commencement) Notice 2016 (Amendment Ordinance Commencement Notice):
* This notice will bring into effect from September 1, 2016 the provisions of the Securities and Futures (Amendment) Ordinance 2014 relating to the mandatory clearing and related record keeping obligations under the OTC derivatives regulatory regime. These include provisions enabling the Securities and Futures Commission to grant an authorisation to providers of automated trading services (ATS) for clearing of OTC derivative products and a designation as a central counterparty (CCP) for the purposes of mandatory clearing obligation.
(2) Securities and Futures (OTC Derivative Transactions - Clearing and Record Keeping Obligations and Designation of Central Counterparties) Rules (Clearing Rules):
* Transactions that are subject to mandatory clearing must be cleared through a designated CCP. Phase 1 clearing will cover dealer-to-dealer trades of certain interest rate derivatives; and apply to transactions between major dealers which are likely to be authorised financial institutions, approved money brokers, licensed corporations or overseas financial services providers.
* The precise ambit of phase 1 clearing is specified in these rules, which set out details such as which transactions will be subject to clearing, in what circumstances, and within what timeframe.
(3) Securities and Futures (OTC Derivative Transactions - Reporting and Record Keeping Obligations) Rules (Commencement) Notice (Reporting Rules Commencement Notice):
* With the implementation of phase 1 clearing, this notice will bring into effect the extension of the mandatory reporting obligation to CCPs that are authorised to provide ATS for clearing OTC derivative products.
(4) Securities and Futures (OTC Derivative Transactions - Reporting and Record Keeping Obligations) (Amendment) Rules 2016 (Reporting Amendment Rules):
* These rules will bring into effect phase 2 reporting. Phase 1 reporting only requires the reporting of transactions in certain interest rate swaps and non-deliverable forwards. Phase 2 reporting will expand the product scope to cover all interest rate derivatives and foreign exchange derivatives not covered in phase 1 reporting, as well as other OTC derivative products, namely equity derivatives, credit derivatives and commodity derivatives. The scope of transaction information to be reported under Phase 2 reporting will also be expanded.
* Subject to negative vetting of these rules by the Legislative Council (LegCo), the Monetary Authority intends to gazette the specific data fields that will have to be completed when reporting under the expanded scope of transaction information for each of the five asset classes in the second quarter of 2016.
(5) Securities and Futures (OTC Derivative Transactions Reporting Obligation - Fees) Rules (TR Fees Rules):
* These rules are made to require the payment of a fee to the Monetary Authority for using the Hong Kong Trade Repository for submitting reports on OTC derivative transactions under the regulatory regime.
(6) Securities and Futures (Fees) (Amendment) Rules 2016 (CCP Fees Rules):
* These rules are made to provide for the application fee for CCP designation and annual fees in respect of designated CCPs.
The six pieces of subsidiary legislation will be tabled before LegCo on February 17, 2016 for negative vetting. The TR Fees Rules will come into operation on May 1, 2016. The Amendment Ordinance Commencement Notice, the Reporting Rules Commencement Notice, the Clearing Rules and the CCP Fees Rules will come into operation on September 1, 2016 when phase 1 clearing will commence. The Reporting Amendment Rules will come into operation on July 1, 2017 when phase 2 reporting will commence.
Ends/Friday, February 5, 2016
Issued at HKT 11:30
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