HKMA, SFC standardize OTC derivatives clearing rules

The Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) have concluded a joint consultation on amendments to the Clearing Rules for over-the-counter (OTC) derivative transactions.

The proposed changes focus on standardizing the annual calculation periods, which are crucial for determining mandatory clearing obligations based on a person's applicable position in relevant OTC derivatives.

Consultation respondents broadly supported this approach, recognizing its potential to increase certainty regarding clearing obligations and facilitate more effective internal planning for market participants.

The current system necessitates regular legislative amendments to update the list of calculation periods, leading to administrative burdens.

The new framework aims to designate these periods permanently, streamlining the regulatory process and enhancing operational efficiency within Hong Kong's OTC derivatives market.

With broad market support, the HKMA and SFC will advance the legislative process to introduce the proposed amendments to the Clearing Rules.

The aim is for these changes to take effect on March 1, 2027, coinciding with the start of the new series of standardized calculation periods.

The amended rules will designate two fixed calendar periods annually: March 1 to May 31, and September 1 to November 30. This permanent designation will replace the current system of regular legislative updates, significantly improving the operational efficiency and predictability of the OTC derivatives regulatory regime for market participants in Hong Kong.