Hong Kong’s twin financial regulators, the Securities and Futures Commission (“SFC”) and the Monetary Authority (“MA”) , have refused to commit to finalizing over-the-counter derivatives reform by the G-20 deadline at the end of next year. In a joint consultation regarding the OTC market, the regulators announced that they might wait for other countries to finish their G-20 reforms before finalizing their own.
“The HKMA and SFC are working towards meeting the G20 implementation deadline of end-2012,” explained the regulators in a press conference yesterday. “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.”
This wait-and-see attitude contravenes a recent statement by the Financial Stability Board (“FSB”), an international working group focused on financial regulation. The FSB encouraged all nations to write regulation to the best of their abilities, rather than wait for the US and the EU to complete their reforms. The 2012 deadline set by the G-20 already is in danger, as countries look at the slow pace of Dodd-Frank implementation (in the United States) and EMIR/MiFID reform (in Europe) and delay their own revisions.
However, SFC executive Ashley Alder notes that “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.” Regulators and politicians from across the globe have made similar statements, calling for harmonization at the expense of rapid reform in order to avoid significant regulatory arbitrage.
The SFC-MA consultation, which runs through the end of November, will discuss a number of reforms, including central clearing, exchange trading, data capture, and record-keeping requirements.