SFC proposes margin requirements for non-centrally cleared OTC derivatives

The Hong Kong Securities and Futures Commission (SFC) has today launched a two-month consultation on proposals to impose margin requirements for non-centrally cleared over-the-counter (OTC) derivatives.

Under the proposals, a licensed corporation which is a contracting party to a non-centrally cleared OTC derivative transaction entered into with an authorised institution, a licensed corporation or another defined entity would be required to exchange margin with the counterparty if the notional amount of their outstanding non-centrally cleared OTC derivatives exceeds specified thresholds.

The consultation also specifies the instruments which would be subject to the proposed margin requirements and the assets eligible as margin.

The SFC works closely with other local and international authorities to put in place a legal and regulatory framework to implement the G20 commitments to reform OTC derivatives markets,” said Mr Ashley Alder, the SFC’s Chief Executive Officer. “These proposals are part of comprehensive reforms to implement international standards and enhance Hong Kong’s regulatory regime for OTC derivatives activities.

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