Consultation Conclusions on reporting and record keeping rules for OTC derivatives

On 15 May the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) published Consultation Conclusions on their further consultation on rules on mandatory reporting and related record keeping obligations under the new over-the-counter (OTC) derivatives regime (Rules).

The consultation considered three ancillary matters relating to the proposed Rules:

• list of stock markets, futures markets and clearing houses to be prescribed for the purposes of defining the scope of the OTC derivatives regime
• reporting of valuation transaction information (including the details of this requirement and the proposed implementation timetable)

• designation of a list of jurisdictions for the purpose of the masking relief.

For more information on the earlier consultation please see our blog entry.

Proposals on certain aspects of the reporting regime have been revised after taking into account market feedback including:

• additional clearing houses and exchanges and exchange operators have been added to the list of securities and futures markets and clearing houses on and through which products traded or cleared will fall outside the scope of the definition of OTC derivative products (please see our separate blog piece)
• amendment of the proposed definition of “affiliate” to expressly exclude collective investment schemes – these will not be subject to the reporting obligations at this stage
• record-keeping obligations have been amended and no longer require that records are readily searchable and identifiable by reference to a particular transaction and counterparty. Additionally the proposed requirement to keep records which evidence communications and instructions that result in the transaction being executed has been removed
• the requirement to submit daily valuation reports has been postponed to a later stage.

In conjunction with the publication of the Consultation Conclusions, the revised Rules were gazetted and on 20 May 2015 will be tabled before the Legislative Council for negative vetting. Subject to enactment of the Rules, draft FAQs relating to operation of the Rules have been prepared to help market participants.

The SFC press release is available here.