Jurisdiction - Hong Kong
Reports and Analysis
Hong Kong – SFC Licensed Corporations To Be Exempted From CFTC Registration As FCMS When Dealing With US Customers In Relation To Futures Trading.

13 May, 2015


The US Commodity Futures Trading Commission (CFTC) has recently issued a Regulation 30.10 order to the Securities and Futures Commission (SFC) in Hong Kong, which will exempt SFC licensed futures or options traders (subject to satisfying certain conditions) from, amongst others, the US registration requirement. Under CFTC Regulation 30.4, persons who solicit or accept orders from US customers for the trading of futures or options outside of the US must be registered with the CFTC as a futures commission merchant (FCM), unless exempted.

It is important to note that the exemption does not extend to regulations relating to trading, directly or indirectly, on US exchanges, and does not pertain to any transactions in swaps. Further, the exemption does not apply to any licensed corporation subject to joint oversight by the HKMA and the SFC, or to any institution subject to oversight solely by the HKMA. Nevertheless, the exemption for Hong Kong will provide Hong Kong futures and options traders/brokerages a platform to access US customers directly.


CFTC Regulation 30.10 permits persons located outside the US to petition for exemption from the requirements set out in the regulation, including the FCM registration requirement. A petition can be filed by foreign regulators such as the SFC on behalf of its licensed corporations. The exemption would be granted if, among other things, in the view of the CFTC, US customers would be given a level of protection in the foreign jurisdiction similar to that which they would receive in the US, ie, there is a comparable regulatory framework to the US.


On 19 March 2015, a Regulation 30.10 order was issued by the CFTC to the SFC allowing SFC licensed corporations to deal directly with US customers in relation to the trading of futures or options on a futures and options exchange subject to the oversight of the SFC (ie, the Hong Kong Futures Exchange Limited), without having to register with the CFTC as a FCM. A SFC licensed corporation which intends to rely on this exemption is required to submit an application and file certain representations with the US National Futures Association through the SFC.


Other foreign regulators and foreign exchanges, such as the Financial Services Authority in the UK and the Tokyo Financial Exchange in Japan, have already been granted such exemption. The Regulation 30.10 order issued to the SFC confirms that it is recognised as a leading regulator in the international community with a robust regulatory framework and provides a platform for licensed corporations in Hong Kong to access US customers.


For more information on the SFC exemption as well as a list of other CFTC Regulation 30.10 exemptions, please see the relevant CFTC Order, the CFTC’s List of Foreign Part 30 Exemptions, and the press releases of the CFTC and the SFC regarding the SFC exemption.


herbert smith Freehills


For further information, please contact:


John O’Donnell, Partner, Herbert Smith Freehills

[email protected]


Matt Emsley, Partner, Herbert Smith Freehills

[email protected]


William Hallatt, Herbert Smith Freehills

[email protected]


Herbert Smith Freehills Capital Markets Practice Profile in Hong Kong


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