HK SFC Surveys Participants in Hong Kong OTC Derivatives Market
All corporations in Hong Kong that are currently engaging in a business of providing automated trading services for, or managing portfolios of, OTC derivative products, dealing in or advising on OTC derivative products, and/or providing clearing agency services for OTC derivative transactions in Hong Kong, are requested to complete the survey. The SFC particularly wishes to draw the survey to the attention of:
• existing licensed corporations;
• existing registered institutions or authorized institutions; and
• non-licensed corporate affiliates of existing licensed corporations or registered institutions in Hong Kong.
One of the purposes of the survey is to assist in the smooth implementation of the new regulatory regime for the OTC derivatives market in Hong Kong (Note 2). The survey will help the SFC to ascertain the number of market participants who may need to be licensed or registered under the new regime.
To this end, the SFC has also issued a Circular to Intermediaries and Other Persons Engaging in Activities concerning Over-the-counter (OTC) Derivative Products or Transactions. The circular includes an annex which describes the proposed changes to the law through which the new regime would be established.
Respondents that are existing licensed corporations or registered institutions may gain access to the survey by following the instructions set out in an email sent to their responsible officers or executive officers. Other respondents may gain access to the survey at this link (Note 3).
1. The SFC and the Hong Kong Monetary Authority issued a joint consultation paper and a supplemental consultation paper concerning the establishment of a regulatory regime governing Hong Kong’s OTC derivatives market in October 2011 and July 2012 respectively. The conclusions resulting from these consultation exercises were published in July 2012 and September 2013 respectively. Both the consultation papers and the conclusions can be downloaded from the SFC’s website at www.sfc.hk.
2. Under the proposed regime, two new types of regulated activity – Type 11 regulated activity (dealing in OTC derivative products or advising on OTC derivative products) and Type 12 regulated activity (providing clearing agency services for OTC derivative transactions) – will be established under Schedule 5 of the Securities and
Additionally, the existing Type 9 regulated activity (asset management) will be expanded to cover the management of a portfolio of OTC derivative products and the existing Type 7 regulated activity (providing automated trading services) will be expanded to cover the provision of automated trading services for OTC derivative products.
In the event of the proposed regime becoming effective, existing participants in the OTC derivatives market may need to be licensed by or registered with the SFC if they wish to continue their existing OTC activities.
3. Prior to completing the survey, respondents are advised to read the consultation papers and conclusions, together with the intended definitions and accompanying explanatory paragraphs set out in the annex to the circular, for a better understanding of the scope of the new or expanded regulated activities, the relevant exemptions and the transitional arrangements.
Respondents are requested to submit their completed surveys electronically through the designated hyperlink or by means of compact disc to the SFC with a covering letter stating their company name and contact information on or before 20 December 2013