The regulatory regime for dark pool operators in Hong Kong, as set out in the new paragraph 19 and Schedule 8 of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission, will come into effect on 1 December 2015. The key requirements under the new regulatory regime are set out in our briefing issued in May 2015.
Whilst the Securities and Futures Commission (SFC) has been stepping up its regulatory scrutiny of dark pool providers and operators and taking enforcement action where warranted, the introduction of the new regime forms a large part of the SFC’s efforts to achieve a level playing field for dark pool users given the lack of pre-trade transparency afforded to them.
The SFC has advocated that dark pool users should be provided with sufficient information to enable them to understand how their orders are handled and executed. As the SFC’s former Executive Director of Enforcement, Mr Mark Steward, commented earlier this year, “no one should dive into dark water without knowing what is hidden”.
Consequently, given that it is now almost six months since the consultation conclusions for the amendments were published in May 2015, we anticipate that the SFC will not be particularly sympathetic to dark pool operators who have yet to ensure they are fully compliant with the new regime on 1 December 2015.
It is therefore crucial that dark pool operators review their existing operations and ensure that they are fully compliant with the new requirements by the end of this month.