On 15 July 2016, the Hong Kong Monetary Authority (HKMA) and Securities and Futures Commission published their further conclusions (Further Conclusions) on their consultation paper issued in September 2015 (Consultation Paper) on introducing mandatory clearing and expanding mandatory reporting for the second stage of the over-the-counter derivatives regulatory regime. The consultation conclusions, summarising and addressing respondents’ comments and seeking further consultation, was issued in February 2016 prior to the Further Conclusions.
Set out below are the main changes contained in the Further Conclusions.
Data fields for phase 2 reporting
The Further Conclusions have clarified and provided further guidance on the scope of phase 2 reporting and how to complete specific data fields. Other issues relating to phase 2 reporting that are addressed in the Further Conclusions include the following:
- two main types of templates, “Standard templates” and “Other templates”, have been developed to facilitate reporting transaction information to the trade repository operated by the HKMA (HKTR);
- the requirement to submit PDF files when reporting transactions has been removed; and
- certain data fields have been renamed to provide clarity on the information required.
The Further Conclusions also include a revised version of the mandatory data fields to be completed for phase 2 reporting.
List of financial services providers
The concept of a “financial services provider” was amended and now refers to a list of specific entities. Only entities that meet certain criteria will be regarded as financial services providers for the purposes of mandatory clearing. The revised list of financial services providers is included in the Further Conclusions.
Reporting counterparty identifying particulars of private individuals
For transactions involving private individuals, reporting entities should provide internal code references relating to such persons, as opposed to providing other identifying particulars of such persons, including their names.
The subsidiary legislation for the implementation of phase 1 clearing and phase 2 reporting has already been enacted. Phase 1 clearing will come into effect on 1 September 2016 and phase 2 reporting will become effective from 1 July 2017. Prior to phase 1 clearing and phase 2 reporting come into effect, related notices in respect of the list of financial services providers and the data fields for phase 2 reporting will be gazetted before 1 September 2016 and 1 July 2017 respectively.
In the meantime, the SFC is in the process of reviewing applications for designated central counterparties, while the HKMA is working on the next phase of system enhancements for the HKTR, which are expected to be ready for testing by market participants in the first quarter of 2017.