The Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) have finalized the Over-the-Counter (OTC) derivatives reporting requirements, as announced on September 26.
OTC derivatives are financial contracts traded directly between two parties, bypassing traditional exchanges. This flexibility allows for customization to meet specific needs but also carries higher risk due to the absence of a centralized clearinghouse and less stringent regulation. According to a 2024 asset management regulation report issued by KPMG, tokenized money market funds can be used as collateral in derivatives transactions to "enhance the efficiency of collateral management" and "reduce operational risks" in these transactions.
Reforms included in the enhancements mandate the use of Unique Transaction Identifiers, Unique Product Identifiers, and reporting Critical Data Elements. "These changes will facilitate the international standardization and harmonization of data elements reported across international OTC derivatives reporting regimes," said HKMA and SFC in a joint statement.
The Hong Kong Monetary Authority serves as Hong Kong’s central bank, responsible for monetary stability, banking oversight, and maintaining financial system stability. The Securities and Futures Commission regulates Hong Kong’s securities and futures markets, ensuring market integrity and investor protection.