Following the G-20 commitment to improve transparency and risk mitigation in the financial markets, a process of extensive regulatory change began across the Asia-Pacific region.
In 2011 and 2012, the HKMA and Securities and Futures Commission (SFC) consulted the market on a proposed regulatory regime for the Over-The-Counter (OTC) derivatives market. The Joint Supplemental Consultation, issued in July 2012, set out in more detail the scope of dealing, advising and other activities to be regulated under the new regime. The consultation also set out proposals for regulating the activities of persons whose positions are so large as to raise concerns about systemic risk (i.e. systemically important participants).
To comply with strict international standards, the new regulatory regime focused heavily on the OTC derivatives markets, including reporting of specified OTC derivatives transactions to the Hong Kong Trade Repository (HKTR), clearing of specified transactions at designated Central Counterparties and margining of non-cleared derivatives.
The Hong Kong Trade Repository will also provide services for trade matching and confirmation.
Supervision in line with Basel III
The HKMA seeks to establish a regulatory framework in line with international standards, in particular those recommended by the Basel Committee on Banking Supervision. The objective is to devise a prudential supervisory system to help preserve the general stability and effective working of the banking system, while at the same time providing sufficient flexibility for authorised institutions to take commercial decisions.
HKMA’s market reform and its impact on market participants
These new requirements impact market participants in most Asian countries, including Hong Kong, Australia, Singapore and Korea.
HKMA published the final rules in Q4 2014.
To view the Reporting requirements, please visit our HKMA Reporting page.
