Fund managers received a reprieve from the initial implementation of Hong Kong’s OTC derivatives reporting regime. In November 2014, the Hong Kong Monetary Authority (“HKMA”) and the SFC jointly published the consultation conclusions on the proposed mandatory reporting and related record keeping obligations under Hong Kong’s new OTC derivatives regulatory regime (the “Conclusions”). In response to industry feedback, the Conclusions set out revisions to the proposals on OTC derivatives regulation including, amongst other things:

  • Implementation of the mandatory reporting and related record keeping obligations for OTC derivatives in phases, where the initial reporting obligations will be limited to regulated entities (i.e. authorized institutions, approved money brokers, central counterparties corporations and SFC-licensed corporations where they are either counterparties to the reportable transactions or conduct trades in Hong Kong on behalf of their affiliates acting as counterparties), and will not extend to Hong Kong licensed fund managers for the OTC transactions of offshore funds that they manage.
  • Extension of the concession period to establish reporting connections to the Hong Kong Trade Repository (“HKTR”) from 3 months to 6 months, and an extension of the period for backloading historical transactions from 6 months to 9 months.
  • Clarification to the basis behind transactions viewed as having been conducted in Hong Kong if an affiliate is a counterparty to the transaction and one of the individuals who made the decision for the affiliate to enter the transaction (i) acted in his / her capacity as a trader; and (ii) was employed or engaged by the reporting entity.

In addition to the above, the Conclusions also seek industry views on the following matters:

  • the reporting of valuation transaction information;
  • a list of designated jurisdictions for the purposes of the masking relief (i.e. where the identity of the counterparty need not be disclosed to the HKTR); and
  • a list of stock markets, futures markets and clearing houses to be prescribed for the purposes of carving out exchange-traded transactions from the definition of “OTC derivatives” and the related reporting requirements.

Read the Consultation Conclusions and Further Consultation on the Securities and Futures (OTC Derivative Transactions – Reporting and Record Keeping Obligations) Rules