Published On: Mon, May 12th, 2014

HK OTC Clear Is Now Able To Offer Its Services To US Clearing Members

Calvin Tai, Head of Global Clearing (Asia), HKEx

Calvin Tai, Head of Global Clearing (Asia), HKEx

OTC Clearing Hong Kong Limited (OTC Clear), a subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx) established to clear over-the-counter derivatives transactions, has received no-action relief from the US Commodity Futures Trading Commission (CFTC), allowing it to offer its clearing services to eligible US persons or affiliates of US persons (US Clearing Members) without being registered as a derivatives clearing organisation (DCO).

The no-action relief is effective immediately until the earlier of 31 December 2014 or the date when the CFTC registers OTC Clear as a DCO or exempts it from registration.

The relief covers clearing of propriety trading by US Clearing Members that involves interest rate swaps, denominated in Hong Kong dollars, renminbi (RMB), US dollars and euros, as well as non-deliverable currency forwards, denominated in RMB, Taiwan dollars, Korean won and Indian rupee.

“We are very pleased to receive the no-action relief from the CFTC because it will allow us to admit our US founding shareholders and other eligible US persons as clearing members,” said Calvin Tai, HKEx’s Head of Global Clearing (Asia). “Our US founding shareholders have a significant role in the OTC derivatives market so this is a very important step forward for OTC Clear, which is a key part of our strategy to establish a strong fixed income and currency business as we expand into more asset classes.

“OTC Clear has also submitted an application to the European Securities and Markets Authority (ESMA) to seek regulatory recognition that will allow the clearing house to accept financial institutions incorporated in the European Union as its clearing members,” Mr Tai said.

Two of OTC Clear’s 12 founding shareholders are affiliates of US banks. The founding shareholders together hold 25 per cent of OTC Clear’s shares and HKEx holds the remaining 75 per cent.

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