The Hong Kong Securities and Futures Commission (SFC) has published consultation conclusions on the proposed regulatory capital regime for licensed corporations engaged in over-the-counter derivatives activities and other proposed changes to the Securities and Futures (Financial Resources) Rules (FRR).
After carefully considering the comments received, the SFC will proceed to implement the proposed regime subject to certain modifications, which include reducing the minimum capital requirements for fund managers’ central dealing desks which meet certain conditions and extending the transitional period for full compliance with the new FRR requirements from six months to one year. The SFC will also introduce into the FRR an internal models approach benchmarking to the latest standards set by the Basel Committee on Banking Supervision.
The proposed changes are necessary to bring our regulation in line with international standards,” said Mr Ashley Alder, the SFC’s Chief Executive Officer. “We are confident that the proposed regime will help ensure stability in our financial markets and facilitate the development of Hong Kong as a derivatives hub and a risk management centre in Asia.
To reflect recent market developments, the SFC seeks to further consult on a number of modified and additional FRR proposals, such as adding four Mainland commodity exchanges to the list of specified exchanges under the FRR to facilitate licensed corporations’ participation in those markets and recognising credit ratings issued by Fitch Ratings. In addition, this consultation covers a set of draft FRR amendments for implementing those proposals which are not specific to over-the-counter derivatives activities. The consultation period ends on 23 August 2017.