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The International Swaps and Derivatives Association, Inc. (ISDA) has published a new clearing classification letter that will enable counterparties to notify each other of their status for clearing requirements under the Hong Kong mandatory clearing regime.
The ISDA Clearing Classification Letter adds a new appendix for Hong Kong clearing classifications. Counterparties have the option to use a short form version or a long form version of the appendix when communicating with each other.
The first phase of Hong Kong’s mandatory clearing regime will come into effect on September 1, 2016, and will cover interest rate derivatives transacted between certain financial institutions. For the purpose of determining whether a counterparty has reached the clearing threshold, the first calculation period will run from September 1, 2016 to November 30, 2016, with clearing obligations commencing on July 1, 2017. This letter allows counterparties to quickly and easily communicate their classification status under the Hong Kong clearing regime in advance.
The ISDA Clearing Classification Letter is a bilateral version of the classification tools that currently exist on ISDA Amend, an online service jointly developed by ISDA and Markit. ISDA is currently working with Markit to implement the short form version of the appendix for Hong Kong clearing classifications as one of the classification tools available on ISDA Amend and will notify market participants as soon as it is made available.
The ISDA Clearing Classification Letter and accompanying appendices are available in the ISDA Bookstore and on the ‘Asia-Pacific’ section of the ISDA website.
