The Securities and Futures Commission (SFC) has announced that the introduction of the initial margin (IM) requirements for non-centrally cleared OTC derivative transactions, initially scheduled to be phased-in from 1 September 2020, will be deferred by one year.

To read our previous blog post on the SFC’s consultation conclusions on margin requirements for non-centrally cleared OTC derivatives, including the original timeline for implementation, please click here.

The new schedule for the introduction of the IM requirements are as follows:

• Phase-in from 1 September 2021 to 31 August 2022: the exchange of IM by a licensed corporation (LC) is required in a one-year period where both the LC and the covered entity have an average aggregate notional amount (AANA) of non-centrally cleared OTC derivatives exceeding HK$375 billion on a group basis.
• On a permanent basis starting from 1 September 2022 and for each subsequent 12-month period: the exchange of IM by an LC is required in a one-year period where both the LC and the covered entity have an AANA of non-centrally cleared OTC derivatives exceeding HK$60 billion on a group basis.

There will be no changes to the timeline for the variation margin requirements (i.e. effective on 1 September 2020).

A copy of the circular can be found here.