Hong Kong joins the rush to slow down WGMR compliance

The Hong Kong Monetary Authority (HKMA) yesterday announced its 6 month “transitional period” (read- delay) to the application of its non-cleared margin rules. The HKMA has taken the same approach as Singapore’s MAS, expecting covered entities to “to begin exchanging margin as soon as practicable”. Unlike both Singapore and Australia, the HKMA does not have a “lookback” provision which includes all trades during the transition period. The Hong Kong rules will apply for phase 1 IM and all VM covered entities form 1 March 2017. However, actual margin exchange will only begin when appropriate documentation and arrangements are in place between each counterparty- only trades from that date will subject to the requirements. The regulator emphasises that “progress during this period will be closely monitored by the HKMA”.

To date, three jurisdictions have announced their own equivalent WGMR no-action letters. Given the very tight timelines which still apply to the US, Canada and Japan (still no news from the OJ for Europe), any flexibility or delay will be welcomed by the market. However, each delay has different parameters, as per the table below.

	Australia	Singapore	Hong Kong
Defined compliance date	Y	N	N
Transition trades to be included	Y	Y	N

In what is already the largest exercise ever undertaken in contract law, it is less than helpful that even the delays add extra complication.

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