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Hong Kong refuses to be bound by 2012

Monday 17 October 2011 - by Karina Whalley and Will Henley

Hong Kong's regulators have refused to commit to a G20 deadline to introduce new standards for over-the-counter derivatives by the end of next year.

Unveiling a joint consultation on changes to the OTC market, the Monetary Authority and Securities and Futures Commission said they may wait until regulatory regimes are in place elsewhere before finalising their own.

"The HKMA and SFC are working towards meeting the G20 implementation deadline of end-2012," the authorities said on Monday.

"However, much depends on external factors, including the progress of reform initiatives in other major markets, due completion of the legislative process, and the readiness of relevant market infrastructure and participants."

The admission appears at odds with the will of the Financial Stability Board, which last week urged countries to advance reforms "as far as they are able to" and not wait for regimes in the US and EU to be put in place.


The FSB has heavily hinted that the 2012 target is looking increasingly in doubt as countries drag their feet on implementing the reforms endorsed at the Pittsburgh summit in September 2009.

These include ensuring that standardised OTC derivative contracts are traded on exchanges or electronic trading platforms and cleared through central counterparties. OTC derivative contracts are also supposed to be reported to trade repositories, and non-centrally cleared contracts are to be subjected to higher capital requirements.

Ashley Alder, chief executive of the SFC, said: "Hong Kong cannot drive the reform initiatives but will continue to coordinate with overseas jurisdictions to address some of the key aspects of the reform, the cross-border nature of the OTC derivatives market necessitates international standards."

Under the consultation, which runs until 30 November, key elements would be subject to change while OTC regulatory reforms are under discussion globally. For instance, transactions would have to be centrally cleared, but not traded on an exchange yet.


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