A licensed corporation, an authorized financial institution or a similar firm that trades OTC derivatives in Hong Kong has to check which obligations apply to the firm and to each trade. The checks cover trade reporting, clearing, and record keeping.

What the regulation requires

Hong Kong's OTC derivatives regulation responds to the structural deficiencies in the OTC derivatives market that the 2008 global financial crisis exposed. On March 26, 2014, the Legislative Council enacted the Securities and Futures (Amendment) Ordinance 2014, which introduced the framework1.

The regime asks for three things:

The content of the G20 agreement is covered in The G20 OTC Derivatives Reforms.

The legal basis is the Securities and Futures Ordinance (Cap. 571) and the rules and notices under it. Part IIIA of the Ordinance deals with designated central counterparties for mandatory clearing2.

Category Name Content
Ordinance Securities and Futures Ordinance (Cap. 571) Section 101C imposes the clearing obligation and section 101E the record keeping obligation3. Section 101J(1) governs designation of central counterparties2
Rules Cap. 571AL (rules on reporting and record keeping obligations) Reporting and record keeping. Made under sections 101L and 101P4
Rules Cap. 571AN (rules on clearing and record keeping obligations and designation of central counterparties) Clearing, record keeping, and designation of central counterparties. Made under sections 101N, 101P, and 101Q5
Other rules and notices Cap. 571AM, Cap. 571AO, Cap. 571AP A notice on stock markets, futures markets and clearing houses, rules on fees for the reporting obligation, and a notice on OTC derivative products, respectively6

The rules are made by the Securities and Futures Commission (SFC). However, both the reporting rules and the clearing rules are made with the consent of the Hong Kong Monetary Authority (HKMA)45.

The roles of the two authorities divide as follows. The SFC designates central counterparties2 and designates the financial services providers that can be the counterparty to a clearing obligation7. Reported trade information goes to the HKMA, specifically to the Trade Repository of the HKMA (HKTR)89.

The text of the rules was checked on October 6, 2026, in the version as made (L.N. 96 of 2015 for reporting and L.N. 28 of 2016 for clearing). The clearing rules were later amended in 2018, 2021, 2022 and 2023, and the reporting rules in 2016 and 202310. Unless stated otherwise, the figures and deadlines below are the values as made.

Who and which transactions are covered

The reporting rules and the clearing rules define the persons covered (a "prescribed person" in the rules) and the transactions covered (a "specified OTC derivative transaction", called a "specified transaction" below) separately.

The prescribed persons for reporting are licensed corporations and authorized financial institutions. Approved money brokers, recognized clearing houses (RCHs), and ATS-CCPs are also covered11.

An RCH counts only when a recognized clearing house acts as a central counterparty. An ATS-CCP counts only when a person authorized to provide automated trading services is providing the authorized service and acting as a central counterparty12.

The prescribed persons for the clearing rules are licensed corporations, authorized financial institutions, and approved money brokers3.

Whether a report is needed depends on the type of prescribed person and where it is incorporated. The table below is limited to licensed corporations and authorized financial institutions. It does not include the reporting obligations of approved money brokers, RCHs, or ATS-CCPs11.

Type When a report is required
Licensed corporation (rule 10 does not distinguish by place of incorporation) When it is a party to the transaction, or when it conducts the transaction in Hong Kong on behalf of an affiliate13
Authorized financial institution incorporated in Hong Kong When it is a party to the transaction, or when it conducts the transaction in Hong Kong on behalf of an affiliate13
Authorized financial institution incorporated outside Hong Kong A transaction booked in a Hong Kong branch. For a transaction booked overseas, when one of the deciding traders works mainly in Hong Kong14

An authorized financial institution incorporated outside Hong Kong must also report a transaction it conducts in Hong Kong on behalf of an affiliate14.

For example, if Bank A is an authorized financial institution incorporated in Hong Kong, it reports to the HKMA the specified transactions to which it is a party. If it is incorporated outside Hong Kong, whether it must report depends on two points. One is whether the transaction is booked in a Hong Kong branch. The other is whether the trader who made the decision works mainly in Hong Kong.

The specified transactions for clearing are interest rate swaps whose features fit the tables in the rules. The features include currency, floating rate index, tenor, optionality, and whether the notional amount is constant. The types are the exchange of one floating rate for another (basis swaps), the exchange of a fixed rate for a floating rate, and overnight index swaps that use an overnight rate15. The scope of clearing when it took effect on September 1, 2016 was certain standardized interest rate swaps. The currencies were the Hong Kong dollar or the G4 currencies (US dollar, euro, pound sterling, and Japanese yen)16. An amendment to the specified transactions took effect on July 1, 2024.

Reporting covers OTC derivative transactions in five asset classes: interest rates, foreign exchange, equities, credit, and commodities (from July 1, 2017)17. Reporting started with certain interest rate swaps and non-deliverable forwards (NDFs).

What is required

Reporting

A prescribed person for reporting submits information on specified transactions to the HKMA. A submission is valid only if it is made through the HKMA's electronic reporting system, in accordance with the instructions the HKMA publishes9. The rules as made required submission within 2 business days of the transaction date for a specified transaction entered into after the transitional period, and within 2 business days of the date of a later event18.

The ISO 20022 XML message standard for reporting was adopted on September 29, 202517.

Clearing

When the following conditions are all met, a prescribed person for clearing must clear the specified transaction with a designated central counterparty within 1 business day after entering into it19.

  • The prescribed person has reached the clearing threshold.
  • For an authorized financial institution or approved money broker incorporated outside Hong Kong, the transaction is booked in Hong Kong.
  • The counterparty is a prescribed person that also meets the first condition (having reached the threshold), or a financial services provider designated by the SFC.

The threshold is measured by the average of the aggregate month-end positions over a calculation period. The aggregate position is the total notional amount; for a person incorporated outside Hong Kong, it excludes transactions not booked in Hong Kong. The table of the rules as made has four calculation periods (the first running from September 1 to November 30, 2016), and the threshold for each was 20 billion US dollars. The obligation arises only for transactions entered into on or after the prescribed day that corresponds to the first calculation period in which the threshold was reached. The prescribed day is a date that the table of the rules sets for each calculation period as the starting point of the obligation. There is a gap between the end of a calculation period and its prescribed day. The four prescribed days run from July 1, 2017 to January 1, 201920.

Once the threshold is reached, the obligation continues even if the position later falls below it, unless the person gives an exit notice. A person can give an exit notice when its month-end positions have stayed below 14 billion US dollars for 12 consecutive months. Its position must also not have been at or above 14 billion US dollars at any time from the last month-end of that period to the date of the notice. A licensed corporation gives the notice to the SFC, and an authorized financial institution or approved money broker gives it to the HKMA21.

The clearing obligation applies even when the counterparty or the transaction is outside Hong Kong. The cases where it does not apply, and the cases where it is deemed to be met, are set out as follows22.

  • The obligation does not apply to a transaction with an affiliate in the same corporate group that meets the requirements in the rules.
  • The obligation does not apply to a transaction that results from multilateral portfolio compression.
  • The obligation may not apply to a transaction booked in an exempted jurisdiction. An exempted jurisdiction is a jurisdiction outside Hong Kong for which the person has given an exemption notice. It is effective from the date the notice specifies and, if a suspension notice is given, until the day before it takes effect. This applies only when the party is a licensed corporation, an authorized financial institution incorporated in Hong Kong, or an approved money broker incorporated in Hong Kong. In addition, the position in each jurisdiction must be at most 5% of the aggregate position, and the total position in exempted jurisdictions at most 10%.
  • A transaction cleared with a designated central counterparty under the law of a jurisdiction that the SFC has specified is deemed to satisfy the obligation.

The figure below sets out five of the conditions above, in the order of the questions, for the rules as made.

YesNoIs it an interest rateswap in the rules'tables?Not aspecifiedclearingtransactionYesNoHas the firm reached theclearing threshold?Outside theobligationYesNoIf incorporated abroad(AFI or AMB): booked inHong Kong?Outside theobligationYesNoIs the counterparty alsoover the threshold, or adesignated FSP?Outside theobligationNoYesA qualifying affiliatetrade, or a multilateralcompression trade?Outside theobligationGenerally subject to theclearing obligation
Figure 1Does the clearing obligation arise for a trade? (rules as made)
Figure description

The figure checks the conditions of the clearing rules (as originally made) through five questions in order. A no to question 1 means the transaction is not subject to clearing. A no to questions 2 to 4 takes it outside the scope. Question 3 sets a place-of-incorporation condition only for authorized institutions and approved money brokers incorporated outside Hong Kong, so other entities answer yes and continue. Question 5 runs the other way: a yes takes the transaction outside the scope. If all are passed, the transaction is in principle subject to the obligation, and the conditions not drawn are in the text above.

Consider a hypothetical example in which the conditions of the rules as made apply. The trade is an interest rate swap in the rules' tables that exchanges a fixed rate for a floating rate, and the trade date is on or after the prescribed day that corresponds to the first calculation period in which the threshold was reached. The trade does not fall under conditions the figure does not draw, such as a trade booked in an exempted jurisdiction.

Example Conditions Applying the conditions in the text
1 A licensed corporation has reached the clearing threshold. The counterparty is a financial services provider designated by the SFC Question 3 does not fall under the place-of-incorporation limit, so the answer is "yes". No question takes the trade outside, so the obligation generally applies
2 The same corporation as in Example 1 trades with an affiliate in the same corporate group. The affiliate is a prescribed person that has reached the clearing threshold Question 4 is "yes". Question 5 is "yes", so the trade falls outside the obligation
3 An authorized financial institution incorporated outside Hong Kong has reached the clearing threshold. The trade is recorded in the books of its overseas head office Question 3 is "no", so the trade falls outside the obligation

The trade in Example 2 is assumed to meet the requirements in the rules for affiliate trades.

On the SFC page, checked on October 6, 2026, four central counterparties are designated for clearing23.

  • Chicago Mercantile Exchange Inc
  • Japan Securities Clearing Corporation
  • LCH Limited
  • OTC Clearing Hong Kong Limited

The current list of financial services providers has been effective since January 1, 2026, and the latest list of prescribed persons that have reached the threshold is dated August 31, 202623.

Record keeping

A prescribed person for reporting or clearing keeps records of specified transactions until at least 5 years after the transaction matures or is terminated. This applies even when the counterparty or the transaction is outside Hong Kong24. The clearing rules require the records to be kept in a way that lets them be retrieved promptly25.

Entry into force and amendments

Date Event
March 26, 2014 The Legislative Council enacted the Securities and Futures (Amendment) Ordinance 20141
July 10, 2015 The first phase of reporting began. Certain interest rate swaps and NDFs are covered17
September 1, 2016 The clearing rules came into operation, and the clearing obligation and the designation of central counterparties took effect1626
July 1, 2017 Reporting widened to five asset classes17
July 1, 2024 Amendments to the specified transactions for clearing and to the designation of central counterparties, made in connection with the global reform of interbank offered rates, took effect16
September 29, 2025 The ISO 20022 XML message standard was adopted for reporting17
Notice dated December 12, 2025 Notice designating financial services providers (G.N. 7742)23

The date on which the clearing obligation arises for a transaction is the prescribed day for each calculation period, the earliest being July 1, 201720.

An amendment made by the Companies (Amendment) (No.2) Ordinance adds references to a "re-domiciled entity" to the reporting and clearing rules27. It relates to the system for moving a company's domicile to Hong Kong (re-domiciliation).

Impact on practice

Reporting and clearing carry deadlines, and record keeping carries a retention period. A report must be made through the HKMA's electronic reporting system, in accordance with the instructions the HKMA publishes. The rules as made required submission within 2 business days of the transaction date for a specified transaction entered into after the transitional period, and within 2 business days of the date of a later event. A transaction subject to clearing is cleared with a designated central counterparty within 1 business day after it is entered into. Records are kept for at least 5 years after the transaction matures or is terminated.

To check whether a clearing obligation applies, the three lists the SFC publishes can be used. The list of designated central counterparties shows which central counterparties are available for clearing, the list of financial services providers shows whether the counterparty is one, and the list of prescribed persons that have reached the threshold shows whether the firm has reached it23.

What this article does not cover

The following are not covered on this page.

  • The text and thresholds of the rules after amendment, and the scope of currencies and indices for specified clearing transactions after amendment. The rules are described in the version as made.
  • The text of the Securities and Futures Ordinance itself.
  • The content and timing of the margin requirements. The SFC page lists a consultation paper of June 2018 and consultation conclusions of December 2019 on margin for OTC derivative transactions that are not centrally cleared28.
  • The licensing categories for dealing in or advising on OTC derivatives, and the state of their implementation. The SFC page records that the 2021 amending ordinance set up the licensing regime for OTC derivatives and provided an exemption for multilateral portfolio compression29.
  • The HKMA's roles other than being the destination of reports and giving consent to the rules.
  • The content of the transitional (concession) period for reporting, the content of the ISO 20022 standard, and the definition of an approved money broker.

Notes

  1. SFC, "OTC derivatives regulatory regime", first paragraph (checked on October 6, 2026). The reference to the 2008 crisis, and the enactment on March 26, 2014. ↩ ↩2

  2. L.N. 28 of 2016, rule 16(1) (page B561). When the SFC considers it appropriate in the interests of investors or the public, it may designate a central counterparty under section 101J(1). ↩ ↩2 ↩3

  3. Clearing rules (Cap. 571AN; L.N. 28 of 2016), Explanatory Note, paragraph 1 (page B583). ↩ ↩2

  4. Reporting rules (Cap. 571AL; L.N. 96 of 2015), "Made by" statement (page B1453). The rules are stated to have been made by the SFC with the consent of the HKMA. ↩ ↩2

  5. L.N. 28 of 2016, "Made by" statement (page B527). The rules are stated to have been made by the SFC with the consent of the HKMA. ↩ ↩2

  6. SFC, "OTC derivatives regulatory regime", the "Subsidiary Legislation and Gazette Notices" list. The names of Cap.571AM, 571AO and 571AP are as in the list, and the descriptions in the table are summaries. ↩

  7. L.N. 28 of 2016, rule 3(1) (page B531). The SFC may, with the consent of the HKMA, designate by notice in the Gazette a person that appears to be actively involved in OTC derivatives outside Hong Kong as a financial services provider. ↩

  8. HKMA, "Over-the-Counter Derivatives Trade Repository" page (checked on October 6, 2026). The regime was built with the Government and the SFC, and reports go to the HKTR. ↩

  9. L.N. 96 of 2015, rule 9(1) (page B1467) and rule 21 (pages B1479 and B1481). A report is duly submitted only when it is made through the electronic reporting system, in accordance with the instructions the HKMA publishes. ↩ ↩2

  10. SFC, "OTC derivatives regulatory regime", "Subsidiary Legislation and Gazette Notices". Clearing rules: Amendment Rules of 2018, 2022 and 2023, and the 2021 ordinance. Reporting rules: Amendment Rules of 2016 and 2023. ↩

  11. L.N. 96 of 2015, rule 5 (page B1465) and rules 10 to 15 (pages B1467 to B1473). RCHs and ATS-CCPs are covered under paragraph (a)(iv) of the definition of "prescribed person" in section 101A of the Ordinance. ↩ ↩2

  12. L.N. 96 of 2015, definitions in rule 2 (around page B1455). The authorization of an ATS-CCP is under section 95(2) of the Ordinance. ↩

  13. L.N. 96 of 2015, rule 10(1) (page B1467; no limit by place of incorporation) and rule 11(1) (page B1469). Rules 10(3) and 11(3) provide that the obligation to report as a party does not apply to an exempt person. ↩ ↩2

  14. L.N. 96 of 2015, rule 12(1) (pages B1469 and B1471). ↩ ↩2

  15. L.N. 28 of 2016, rule 4 (page B533) and Schedule 1, sections 1 and 2 (pages B569 to B573). Three types: basis swaps, fixed-to-floating swaps, and overnight index swaps. ↩

  16. SFC, "OTC derivatives regulatory regime", the "Mandatory clearing" paragraph. Clearing of standardized IRS in HKD or the G4 currencies, and the designation of central counterparties, took effect on September 1, 2016. The amendments made in connection with the reform of interbank offered rates took effect on July 1, 2024. ↩ ↩2 ↩3

  17. SFC, "OTC derivatives regulatory regime", the "Mandatory reporting" paragraph. July 10, 2015 (certain interest rate swaps and NDFs), July 1, 2017 (five asset classes), September 29, 2025 (ISO 20022). ↩ ↩2 ↩3 ↩4 ↩5

  18. L.N. 96 of 2015, rule 24(1) (page B1487) and rule 25(1) (page B1489). Rules 22 and 23 deal with the concession period and similar matters. ↩

  19. L.N. 28 of 2016, rule 6(1) (page B535). ↩

  20. L.N. 28 of 2016, "prescribed day" in rule 2, rules 6(1)(a)(i), 6(5) and 6(6) (pages B535 to B541), and Schedule 2 (page B581). ↩ ↩2

  21. L.N. 28 of 2016, rule 6(2) (page B537), and rules 6(3) and 6(4) (pages B537 to B539). ↩

  22. L.N. 28 of 2016, rules 7 to 11 (pages B541 to B555). The definition of an exempted jurisdiction is in rule 9(3). ↩

  23. SFC, "OTC derivatives regulatory regime" (checked on October 6, 2026): the lists of designated central counterparties, of prescribed persons that have reached the threshold, and of financial services providers, and G.N. 7742 (December 12, 2025). ↩ ↩2 ↩3 ↩4

  24. L.N. 96 of 2015, rules 27 and 28 (page B1497), and L.N. 28 of 2016, Explanatory Note, paragraphs 13 and 14 (page B587; rules 12 and 13). ↩

  25. L.N. 28 of 2016, rule 15 (page B559). ↩

  26. L.N. 28 of 2016, rule 1 (page B527). The rules come into operation on September 1, 2016. ↩

  27. SFC, "OTC derivatives regulatory regime", the "Primary Legislation" list. Description of the Companies (Amendment) (No.2) Ordinance, Sections 256-260 of Division 29 of Part 4. ↩

  28. SFC, "OTC derivatives regulatory regime", the "Public Consultations and Conclusions" list. The June 2018 consultation paper and the December 2019 consultation conclusions on margin for non-centrally cleared OTC derivative transactions. ↩

  29. SFC, "OTC derivatives regulatory regime", the "Primary Legislation" list. Description of the 2021 amending ordinance ("Securities and Futures and Companies Legislation (Amendment) Ordinance 2021"). ↩