The Securities and Futures Commission (SFC) today launched a consultation on proposed changes to the position limit regime for listed futures and options contracts (Note 1).
A key proposal is to set out how the statutory prescribed limits and reporting requirements should be applied to unit trusts and sub-funds under an umbrella fund (Note 2). Other proposed changes (Note 3) involve reportable positions in contracts traded on holiday trading days (Note 4) and the inclusion of a broader range of contracts which may be authorised by the SFC for excess positions (Note 5).
“The position limit regime is essential to prevent the build-up of positions which may threaten the stability of the Hong Kong financial market,” said Mr Ashley Alder, the SFC’s Chief Executive Officer. “The proposed changes will address the needs of the market and better align the regime with the SFC’s regulatory policies and objectives.”
The public is invited to submit their comments by 27 June 2022 via the SFC website (www.sfc.hk), by email to position-limit@sfc.hk, by post or by fax to 2521 7917.
Notes:
- Under section 35(1) of the Securities and Futures Ordinance, the SFC may prescribe limits on the number of futures and options contracts which a person may, directly or indirectly, hold or control and require a person holding or controlling a reportable position to lodge a notice of that reportable position with a recognised exchange company or the SFC. The statutory prescribed limits and reportable positions are set out in the Securities and Futures (Contracts Limits and Reportable Positions) Rules.
- The proposals specify that prescribed limits and reportable positions would apply to each unit trust and sub-fund under an umbrella fund as if it were a stand-alone fund.
- The other proposals include introducing an authorisation mechanism for a clearing participant to hold excess positions when providing clearing services and prescribing position limits and reportable positions in relation to some futures and options contracts launched by Hong Kong Exchanges and Clearing Limited (HKEX) in recent years.
- Under the existing rules, reportable positions are only required to be reported on business days. After the launch of HKEX’s Derivatives Holiday Trading programme on 9 May 2022, this will have to be changed to include holiday trading days. For details, please refer to HKEX’s consultation conclusions.
- These would include the weekly Hang Seng Index (HSI) and Hang Seng China Enterprises Index (HSCEI) options contracts, HSI and HSCEI futures options contracts, and Hang Seng TECH Index futures and options contracts. Under the existing Rules, the SFC may only authorise excess positions in HSI and HSCEI futures and options contracts.
