8 July, 2013
Legal News & Analysis – Asia Pacific – Hong Kong – Dispute Resolution
The Securities and Futures (Amendment) Bill 2013 (the “Bill”) was gazetted on 28 June 2013 following a joint consultation exercise conducted by the Hong Kong Monetary Authority (“HKMA”) and the Securities and Futures Commission (“
The Bill is being driven by a current lack of regulation for OTC derivative transactions which has made it difficult for regulators to track OTC derivative positions which could have an impact on the broader market – issues highlighted by the global financial crisis. Additionally, G20 leaders have committed to regulating OTC derivative transactions and Hong Kong needs to keep in line with such regulatory developments.
Key aspects of the Bill
There are three main sets of proposals dealt with in the Bill:
(1) Mandatory reporting, clearing and trading obligations in line with G20 commitments – the mandatory requirements will apply only to authorised institutions, approved money brokers, licenced corporations and others prescribed by subsidiary legislation who will be required to report certain OTC derivative transactions to the HKMA. Only certain types of OTC derivative transactions will initially be caught (certain types of interest rate swaps and non-deliverable forwards). Clearing of certain OTC derivative transactions will be required to be done through a designated central counterparty (“CCP”), either directly or indirectly through a third party that is a member of the designated CCP. The mandatory trading regime is subject to further study and will not be introduced at the outset.
(2) Establishment and regulation of the necessary infrastructure through which the mandatory obligations will be fulfilled – the
(3) Regulation and oversight of key players in the OTC derivative market – authorised institutions and approved money brokers serving as intermediaries in the OTC derivatives market will continue to be regulated by the HKMA. Other entities engaged in dealing in, advising on or providing clearing agency services will require licences from the
Other proposals to improve regulation
The Bill also incorporates amendments to the SFO so that notifications and reports under Part XV “Disclosure of Interests” of the SFO will need to be filed electronically to speed up publication to the market. Additionally, the SFO and Organized and Serious Crimes Ordinance will be amended to enable courts to make disgorgement orders to recoup illegal gains made from market misconduct offences.
The Bill is due to be presented to Legco for a first reading on 10 July 2013.
A copy of the bill and the Legco brief can be found here.
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