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The following is issued on behalf of the Financial Services Development Council:
The Financial Services Development Council (FSDC) today (February 26) released a report entitled "Hong Kong's position limits regime for exchange-traded derivatives - the need for revision" which sets out recommendations to refine Hong Kong's position limits regime, with a view to enhancing the development of Hong Kong's exchange-traded derivatives market.
The Chairman of the FSDC, Mrs Laura M Cha, said, "Hong Kong has a developed exchange-traded equity derivatives market to serve market participants' risk management, investment and trading needs. With the remarkable development of the market over the years, Hong Kong's existing derivative position limits regime should be updated and adjusted, making it less restrictive and in line with other major international financial centres.
"The FSDC believes that there is room for Hong Kong to develop into a more resilient and better regulated market. A prompt and timely refinement of the position limits regime would help Hong Kong maintain its global competitiveness and better realise its potential as a leading international financial centre."
The report notes that Hong Kong is the only market adopting a position limits regime with no hedging exemptions for market neutral transactions of qualified market users whose hedging needs exceed the limits. To enhance Hong Kong's competitiveness, it proposes the introduction of a hedging exemption regime to allow qualified investors to exceed the limits with market neutral transactions upon the approval of regulators, and a holistic review of the current position limits for all exchange-traded derivatives along with the possible introduction of a system that sets position limits based on relevant market and product-specific factors. The report also suggests introducing enhancements to existing clearing houses' risk management measures, as appropriate, along with the above recommendations.
Taking into consideration the increasing investment demand for exposure to the China market and the likelihood that A-shares will be included in global equity benchmarks in the near future, the report opines that a revised position limits regime would provide an improved risk management dimension to Hong Kong's existing strength in terms of China market access. It would also enable Hong Kong to better compete with other financial centres and enhance its relevance to China's market opening plans.
The full report has been uploaded to the FSDC website: www.fsdc.org.hk.
About the FSDC
The Hong Kong Special Administrative Region Government established the FSDC in 2013 as a high-level, cross-sectoral advisory body to engage the industry in formulating proposals to promote the further development of Hong Kong's financial services industry and to map out the strategic direction for development.
The FSDC has set up five committees, namely the Policy Research Committee, the Mainland Opportunities Committee, the New Business Committee, the Market Development Committee and the Human Capital Committee, as the five streams of its work.
Ends/Friday, February 26, 2016
Issued at HKT 16:01
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