Hong Kong plans clearing of OTC derivatives

HONG KONG, Dec 10 (BestGrowthStock) – Hong Kong plans to set up a
regulation system for over-the-counter derivatives, authorities
said on Friday, as part of a global push to increase
transparency in the market following the financial crisis.

The move is part of Hong Kong’s efforts to meet commitments
made by the Group of 20 leading developed and emerging market
countries to centrally clear and report off-exchange traded
derivatives to repositories by the end of 2012.

Hong Kong’s Securities and Futures Commission (SFC) said
in a statement it will work with the government, the Hong Kong
Monetary Authority and Hong Kong Exchanges and Clearing Ltd
on the regulations.

The SFC said interest rate swaps and non-deliverable
forwards will be the first products required to be reported to
the trade repository and centrally cleared.

The SFC plans to consult the market on the regulatory
regime
by the third quarter of next year to pave the way for the
roll-out of the trade repository and a central counterparty by
the end of 2012, it said.

Clearing houses in Europe and the United States have
already
begun to clear credit default swaps amid a global regulatory
push to inject more transparency into a sector found at the
heart of the financial crisis.

The aim is to prevent a repeat of the crisis in the
derivatives market following the collapse of Lehman Brothers
and near-collapse of AIG when many trades linked to
those institutions couldn’t be settled.

Hong Kong has the largest OTC derivatives market in Asia
although the market is still relatively small compared to
Europe
and the United States. Singapore Exchange launched
Asia’s first clearing service for over-the-counter derivatives
last month. [ID:nSGE6AE0UB]
(Reporting by Lee Chyen Yee and Rachel Armstrong; Editing by
Muralikumar Anantharaman)

Hong Kong plans clearing of OTC derivatives