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Published: July 16, 2024
March 2024 saw the ‘Hong Kong Monetary Authority’ (HKMA) and ‘Securities and Futures Commision’ (SFC) conclude their joint consultation on enhancements to the OTC derivatives reporting regime. This is a continuation of ongoing efforts with the Government of Hong Kong Special Administrative Region and relevant stakeholders response to the 2008 financial crisis. It is also aligning with the G20 commitment to reform OTC derivatives markets, aiming to enhance transparency, financial stability, and reduce operational and systemic risk.
Over time, HKMA has implemented several reporting, clearing and enhancements in 5 key assets classes; namely Interest Rates, Foreign Exchange, Credit, Equities and Commodities.
| Key Changes in HKMA Rewrite | What happens after 29th September 2025 |
| Unique Transaction Identifier (UTI) | UTI will be mandated for reporting new trades, including their life-cycle events and valuation, occurring after the implementation date. The UTI Technical Guidance will be adopted for approaches, format, structure, and generation logic. The UTI generation steps will follow the UTI Technical Guidance (TG Waterfall). |
| Unique Product Identifier (UPI) | Reporting entities must provide the UPI for derivatives in each reportable transaction submitted to HKTR. HKMA will monitor its development and align practices with other regulators, maintaining specific product-related data fields in reporting requirements. |
| Critical Data Elements (CDE) | Where certain data fields are not covered by the CDE Technical Guidance but are required in other jurisdictions, HKMA intends to align their definitions as closely as possible with global standards to facilitate data aggregation and reporting. The proposed data elements will replace the current set upon the CDE implementation in Hong Kong. |
| Adoption of ISO-20022 Standard | Adopting the ISO 20022 XML message standard is crucial for harmonization efforts. HKMA and SFC propose to adopt ISO 20022 XML format for OTC derivatives reporting to HKTR concurrently with the implementation of UTI, UPI, and CDE in a “big bang” approach on the implementation date. |
Similarly to other rewrites, there is an increase on the number of reportable fields. More specifically, in comparison to HKMA there are 33 additional data elements proposed for HKMA Rewrite in relation to 4 different topics namely (select each theme to view the fields):
| No. | Field Name |
| 37 | Collateral portfolio indicator |
| 38 | Collateral portfolio code |
| 39 | Initial margin posted by the counterparty 1 (pre haircut) |
| 40 | Initial margin posted by the counterparty 1 (post haircut) |
| 41 | Currency of initial margin posted |
| 42 | Initial margin collected by the counterparty 1 (pre haircut) |
| 43 | Initial margin collected by the counterparty 1 (post haircut) |
| 44 | Currency of initial margin collected |
| 45 | Variation margin posted by the counterparty 1 (pre haircut) |
| 46 | Variation margin posted by the counterparty 1 (post haircut) |
| 47 | Currency of variation margin posted |
| 48 | Variation margin collected by the counterparty 1 (pre haircut) |
| 49 | Variation margin collected by the counterparty 1 (post haircut) |
| 50 | Currency of variation margin collected |
| 51 | Excess collateral posted by the counterparty 1 |
| 52 | Currency of excess collateral posted |
| 53 | Excess collateral collected by the counterparty 1 |
| 54 | Currency of excess collateral collected |
| 55 | Collateralisation category |
| 156 | Initial margin collateral portfolio code |
| 157 | Portfolio containing non-reportable component indicator |
| 158 | Variation margin collateral portfolio code |
| 192 | Collateral timestamp |
| No. | Field Name |
| 9 | Direction 1 |
| 10 | Direction 2 – Leg 1 |
| 11 | Direction 2 – Leg 2 |
| No. | Field Name |
| 201 | Secondary transaction identifier |
| 202 | Lower or only barrier |
| 203 | Upper barrier |
| No. | Field Name |
| 136 | Action type |
| 137 | Event type |
| 138 | Event timestamp |
| 139 | Event identifier |
A comparison of how legacy trades are treated in the different Jurisdictions:
| Reporting of Legacy Transactions | Amendment of Legacy Trades | |
| HKMA Rewrite | Require the re-reporting of live legacy transactions and adopt the new reporting format only if the transaction has a maturity of more than one year as at 25th September 2025. | Amendments to legacy transactions will need to be reported in the new reporting format within two business days. |
| MAS Rewrite | Re-reporting of OTC derivatives is not required for contracts that have a maturity of less than 6 months from October 2024. | Amendments made to legacy trades should be made under the new schema. |
| ASIC Rewrite | OTC Derivatives with an Expiration date later than 20 October 2025 and Termination before 20 April 2025 will only be required to be re-reported. | Only the information already recorded in electronic form needs to be re-reported. |
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Optimising data collection processes and possibly investing in new technological solutions will be crucial to guarantee accurate reporting.
Significant adjustments to internal processes. This includes updating compliance procedures, risk management frameworks and reporting.
As experienced with other jurisdictions’ proposed waterfall approach which is applied to determine which counterparty is required to generate a UTI.
This is likely when implementing UPI across all products. For example, the industry is facing challenges in obtaining UPI for products with equity underliers that do not have ISIN.
Members envisage challenges and cost burden maintaining two parallel production systems to cater to the reporting of legacy trades with maturity within one year as at the implementation date in the legacy template and new trades in the ISO XML format.
Our highly skilled consultants at First Derivative can help you with regulation interpretation, implementation and support you with overcoming your regulatory obstacles. We provide extensive expertise in many areas such as PM, PMO, BA and QA and would endeavor to lighten your load and help you on the road to success. First Derivative is ready and waiting for your call.
Victoria Irojah
Managing Consultant
First Derivative
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Provides capital markets, programme management expertise to our industry-leading banking clients: MiFID II, SFTR, FATCA, SEC SBSD and CFTC.
Currently managing the SFTR Remediation at US Tier 1 IB.
Brings 20+ years’ experience and knowledge in Financial Services focused on regulatory change in capital markets. Trade and Transaction Reporting SME in EMIR and MiFID.
Highly experienced Financial Services professional, possessing strong commercial aptitude and client management skills. Brings strong remediation and operational experience working in the transaction reporting domain with main focus on EMIR.
A structured derivatives specialist with over 16 years of experience. Has experience in requirements elicitation and documentation, stakeholder management, testing and trade support.
