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The Securities and Futures Commission (SFC) today designated four central counterparties (CCPs) for the purposes of the mandatory clearing obligation for certain over-the-counter (OTC) derivative transactions (Note 1). The designation of one local CCP and three major overseas CCPs will provide a variety of choices for market participants who under Hong Kong law are subject to mandatory clearing, which will come into effect on 1 September 2016 (Note 2).
The four designated CCPs are:
- Chicago Mercantile Exchange Inc
- Japan Securities Clearing Corporation
- LCH.Clearnet Limited
- OTC Clearing Hong Kong Limited
Market participants may fulfil their mandatory clearing obligations by clearing their transactions through any of these designated CCPs (Note 3).
Each of these designations has been granted subject to conditions, the full texts of which have been posted on the SFC's website.
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Notes:
- The mandatory clearing obligation in section 101C of the Securities and Futures Ordinance (SFO) mandates that certain OTC derivative transactions, stipulated in subsidiary legislation, must be centrally cleared through a central counterparty designated by the SFC under section 101J of the SFO.
- The Securities and Futures (OTC Derivative Transactions—Clearing and Record Keeping Obligations and Designation of Central Counterparties) Rules stipulate the specific transactions that are subject to mandatory clearing.
- The initial scope of mandatory clearing in Hong Kong will cover transactions in certain standardized interest rate swaps that are denominated in HKD or one of the G4 currencies (USD, EUR, GBP and JPY).
