Global Trustee and Fiduciary Services Bite-Sized Issue 9 2023

Global Trustee and Fiduciary Services Bite-Sized | Issue 9 | 2023 6 QUICK LINKS CYBER FINTECH MONEY MARKET FUNDS SUSTAINABLE FINANCE/ ESG AUSTRALIA ASIA EUROPE NORTH AMERICA UNITED KINGDOM SFC Concludes Consultation on Risk Management Guidelines for Futures Dealing Activities On 25 August 2023, the SFC published consultation conclusions on its proposed risk management guidelines for licensed futures brokers. The guidelines set out a comprehensive risk management framework for futures brokers which covers market risk management, commodity futures trading, client credit risk management, concessionary margining and risk management over executing or clearing agents. Requirements for funding liquidity risk management, safeguarding client assets, trading in futures markets outside Hong Kong, and stress testing are also included. The SFC states that respondents generally appreciated its guidance on the risk management practices expected of futures brokers and their feedback has been incorporated in the guidelines where appropriate. To address the market’s comments, the SFC has provided more principles- based guidance in place of some prescriptive rules and quantitative thresholds. Futures brokers have a transitional period of six months to comply with the guidelines and an additional 12 months to implement system changes for compliance with requirements relating to the automation of client risk limit controls and stress testing. The guidelines were gazetted on 25 August 2023 and will become effective on 25 February 2024. Link to Consultation Conclusions here SFC Issues Latest Quarterly Report On 23 August 2023, the SFC published its latest Quarterly Report which summaries key developments from April to June 2023. New initiatives to develop Hong Kong as an offshore renminbi and risk management centre were launched during the quarter. Swap Connect, the first Connect programme for financial derivatives products, commenced northbound trading in May. In June, the renminbi ( RMB ) counters of 24 stocks were launched for trading under the HKD-RMB Dual Counter Model. The dual counter market making programme would enhance liquidity and minimise share price gaps between the two counters. The Quarterly Report states that Southbound ETF trading has maintained strong momentum through the debut year for ETF Connect. Its average daily turnover increased 20 times from HKD216 million in July 2022 to $HKD4.64 billion in June 2023, which contributed 18.4% of the eligible Hong Kong ETFs’ turnover during the month. To support the development of the Fintech ecosystem in Hong Kong, the SFC launched a new licensing regime under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance for virtual asset trading platform ( VATP ) operators in June. Two VATPs licensed under the Securities and Futures Ordinance have obtained the SFC’s approval to provide services to retail investors. The SFC also published a statement to warn VATPs of the potential legal and regulatory consequences of improper practices and remind investors to be wary of the risks of trading virtual assets on unregulated platforms. During the quarter, the SFC announced its commitment to carbon neutrality by 2050, in line with the HKSAR Government’s climate strategy, with an interim target to reduce 50% of its total carbon emissions by 2030. Link to SFC Quarterly Report here SFC Concludes Consultation on Amendments to Enforcement-related Provisions of the SFO On 8 August 2023, the SFC published its Consultation Conclusions on proposed amendments to enforcement-related provisions of the Securities and Futures Ordinance (SFO). The SFC will proceed with the proposal to broaden the scope of the SFO’s insider dealing provisions. The scope of the insider dealing provisions of the SFO will be broadened to cover: i. Insider dealing perpetrated in Hong Kong with respect to securities listed on overseas stock markets or their derivatives; and