SFC holds consultations for rules enhancing market developments for OTC derivatives

Aims to lower transaction thresholds and costs.

Draft amendments to the Financial Resources Rules (FRR) began public consultation on Monday, according to the Securities and Futures Commission (SFC).

The rules intend to set internationally comparable capital requirements for licensed corporations (LCs) engaging in over-the-counter derivative activities (OTCD capital requirements).

The new OTCD capital requirements for inter-dealer brokers will be lowered sharply, whilst transfer pricing treatments for LCs will be simplified, following the updates in Hong Kong’s Banking (Capital) Rules and the Basel Framework.

SFC also proposed measures facilitating LCs’ trading of stocks in Mainland China and emerging markets, trading of commodities and carbon products, as well as digital asset futures and options on licensed platforms.

In addition, capital requirements for centrally cleared repurchase transactions (repos) are proposed to be exempted to promote the city’s inter-dealer repo market.

“We are confident that these proposals will facilitate innovation and boost the sustainable development of Hong Kong’s offshore RMB, FICC, and digital asset markets,” said Dr. Eric Yip, the SFC’s Executive Director of Intermediaries.