The Securities and Futures Commission (SFC) today launched a public consultation on draft amendments to the Securities and Futures (Financial Resources) Rules (FRR) and related guidelines for implementing a set of internationally comparable capital requirements for licensed corporations (LCs) engaging in over-the-counter derivative activities (OTCD capital requirements) (Note 1).
Under the proposal, the OTCD capital requirements previously proposed (Note 2) have been fine-tuned with reference to recent changes to Hong Kong’s Banking (Capital) Rules and the Basel Framework (Note 3). The capital requirements for inter-dealer brokers will also be significantly lowered and transfer pricing treatments for LCs will be simplified to reflect the comments received during the SFC’s 2017 consultation (Note 4).
In addition, the SFC proposed various other FRR changes to support LCs’ business development and diversification. These include measures to facilitate LCs’ trading of stocks in Mainland China and emerging markets, commodities and carbon products, as well as digital asset futures and options on licensed virtual asset trading platforms. Also, to drive Hong Kong’s development as a regional fixed income and currency hub, the SFC proposed to exempt the capital requirements for centrally-cleared repurchase transactions (repos) to promote their central clearing in Hong Kong and the development of the city’s inter-dealer repo market (Note 5).
“To reinforce Hong Kong’s status as an international financial centre, it is crucial to align our OTCD capital requirements with global standards,” said Dr. Eric Yip, the SFC’s Executive Director of Intermediaries. “We are confident that these forward-looking and inclusive proposals will facilitate innovation and boost the sustainable development of Hong Kong’s offshore RMB, FICC (Note 6), and digital asset markets.”
In the meantime, the SFC published conclusions on certain FRR changes which it previously consulted on.
The public is invited to submit their written comments on the consultation by 13 October 2025 via the SFC website (www.sfc.hk), by email to frr_consultation@sfc.hk, by post or by fax to 2523 4598.
Notes:
- The related guidelines refer to the draft Guidelines for Internal Models Approach for FRR Market Risk Charges Calculation and draft General Principles for Model Risk Management.
- In 2015, the SFC consulted on a conceptual framework of capital requirements for LCs engaging in OTC derivative activities. In 2017, the SFC concluded that the framework was appropriate and made some proposed changes for further consultation in 2017. For details, please refer to the SFC’s Consultation Paper on Proposed Changes to the Securities and Futures (Financial Resources) Rules (17 July 2015) and the Consultation Conclusions and Further Consultation on Proposed Changes to the Securities and Futures (Financial Resources) Rules (24 July 2017) (2017 Consultation Conclusions and Further Consultation Paper).
- The Basel Framework consolidates all banking supervision and capital standards of the Basel Committee on Banking Supervision, which is the primary global standard setter for the prudential regulation of banks.
- For details of the consulted changes, please refer to the 2017 Consultation Conclusions and Further Consultation Paper.
- “Centrally-cleared repos” here refer to repos that are cleared through central counterparties approved by the SFC.
- “FICC” refers to fixed-income, currency and commodity.
