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White & Case Derivatives Insight – The Delta Report

OTC Derivatives Reporting and Clearing in Hong Kong – A Snapshot

Derivatives Newsletter
September 2016

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Derivatives Insights

The first phase of the OTC derivatives regulatory regime in Hong Kong commenced in April 2014 with the enactment of the Securities and Futures (Amendment) Ordinance 2014 (the "Amendment Ordinance"). The Amendment Ordinance serves as a broad framework which allows for the implementation of mandatory reporting, clearing, trading and record keeping obligations in respect of OTC derivative transactions. On 10 July 2015, the Securities and Futures (OTC Derivative Transactions – Reporting and Record Keeping Obligations) Rules (the "Reporting Rules") came into effect. The Reporting Rules set out the detailed reporting and related record keeping requirements. The Amendment Ordinance and the Reporting Rules together introduced mandatory reporting in Hong Kong in respect of certain interest rate swaps and non-deliverable forwards ("Phase 1 Reporting").

On 30 September 2015, the Hong Kong Monetary Authority (the "HKMA") and the Securities and Futures Commission (the "SFC") issued a joint consultation paper (the "Consultation Paper") to propose the next steps to the OTC derivatives regulatory regime: (a) mandatory clearing of certain derivative trades ("Phase 1 Clearing"); and (b) expansion of the mandatory reporting requirements ("Phase 2 Reporting"). The conclusions of the Consultation Paper (the "Conclusions Paper") were published on 6 February 2016 which included a draft of the Securities and Futures (OTC Derivative Transactions – Clearing and Record Keeping Obligations and Designation of Central Counterparties) Rules ("Clearing Rules").

This article provides a snapshot of the current mandatory reporting and clearing requirements and outlines the key proposals under Phase 2 Reporting and Phase 1 Clearing.


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