Response to the SFC's Consultation Summary on Risk Management Guidelines for Futures Trading Activities dated August 25, 2023
Release Date: 2023-08-26
August 26, 2023
We hereby present our response to the SFC's Consultation Summary regarding the Risk Management Guidelines for Futures Trading Activities:
Notable progress has been achieved in several critical areas, including:
1. Regulations for the commodity futures sector now mandate that brokers involved in physical futures delivery adhere to applicable regulations;
2. The previous requirement to fulfill margin calls twice within a 30-day period has been eliminated;
3. The preferential margin for quick liquidity surplus has been increased from 10% to 50%;
4. The frequency of stress testing has been adjusted from daily to weekly;
5. The obligation to disclose the names of overseas agents on the websites of commodity futures traders has been rescinded;
6. These guidelines will come into effect on February 25, 2024, accompanied by transitional provisions and an 18-month adaptation period.
These outcomes are a testament to the persistent efforts made and reflect numerous modifications from the originally proposed guidelines. However, they also highlight that had the industry not utilized various channels and methods to voice their concerns, these issues might have been overlooked. It is not an exaggeration to assert that another set of regulatory guidelines, which could potentially jeopardize the industry, has emerged. Is this truly the intention of the regulatory authorities?
While the initial defaults in delivery were associated with a foreign commodity exchange, local commodity futures traders are now bearing the repercussions. Is this equitable?
Any alterations to policy, even those described as "easing" measures, elevate compliance costs for the industry and diminish Hong Kong's external competitiveness. This should not be viewed as a positive development.
Mofiz Chan
Chairman
Hong Kong Securities and Futures Professionals Association
Additionally, we previously responded to the SFC's consultation on January 6, 2023, expressing our opposition to the Consultation Paper on Risk Management Guidelines for Licensed Persons Engaged in Futures Contract Trading.
http://www.hksfpa.org/video.aspx?clid=143&atid=1442&lan=1
A summary of our meeting with the SFC on March 27, 2023, regarding the Risk Management Guidelines for Licensed Persons Engaged in Futures Contract Trading can be found here:
http://www.hksfpa.org/video.aspx?clid=143&atid=1518&lan=1