PwC's Managing upstream risk: Regulatory reform review - An asian perspective November 2013 | Page 10

2.5 OTC Derivatives

by The Options Clearing Corporation as
conventional options for purposes of FINRA
Rule 2360 (Options) and as listed options
for purposes of FINRA Rule 4210 (Margin
Requirements). Accordingly, OCC cleared OTC
options will be considered conventional options
for purposes of position limit and reporting
requirements and delivery of certain disclosure
documents and will be considered listed options
for purposes of margin requirements, including
maintenance margin requirements and portfolio
margin requirements. The effective date is
November 7, 2013.

Update

CPSS and IOSCO on 15 November 2013
published a consultative report on the public
quantitative disclosure standards for central
counterparties, proposing disclosures that are
intended to support the objectives of enabling
stakeholders, including authorities, participants
(direct, indirect and prospective) and the
public, to:
• Compare CCP risk controls, including
financial condition and financial resources to
withstand potential losses;
• Have a clear, accurate and full understanding
of the risks associated with a CCP;

Hong Kong

On 25 October 2013, OTC Clearing Hong
Kong Limited (OTC Clear) a subsidiary of
HKex, announced that the SFC has granted it
recognition as a clearing house under section
37 of the Securities and Futures Ordinance.
OTC Clear is established for the purpose of
providing clearing services for OTC derivatives.
Following the SFC’s recognition of OTC Clear,
HKEx completed the subscription agreement
under which 12 FIs agreed to subscribe for nonvoting ordinary shares of OTC Clear as founding
shareholders. The 12 founding shareholders
together hold 25 per cent of OTC Clear’s total
issued share capital while HKEx holds the
remaining 75 per cent. HKEx continues to hold
100 per cent of OTC Clear’s voting ordinary
shares.

Japan

It has been reported that the derivatives market
integration between Tokyo Stock Exchange
(TSE) and Osaka Securities Exchange (OSE)
has been scheduled for 24 March 2014. Trading
in the new derivatives market will be conducted
on the OSE’s J-GATE trading system.

OSE will make revisions to its trading and
participant rules so that futures and options
contracts currently listed on the TSE market
are listed on OSE upon integration, and TSE
will abolish its corresponding rules regarding
futures and options trading. In addition,
trading and other rules regarding exchange
foreign exchange margin trading will remain
unchanged from existing OSE rules.

• nderstand and assess a CCP’s systemic
U
importance and its impact on systemic risk;
and
• nderstand and assess the risks of
U
participating in CCPs (directly, and, to the
extent relevant, indirectly).

The matrix provided in the document describes
CPSS-IOSCO quantitative disclosure standards
for CCPs. Together with the CPSS-IOSCO
Disclosure Framework, these constitute the
disclosures expected of a CCP under Principle
23, Key Consideration 5, of the CPSS-IOSCO
Principles for financial market infrastructures.
The matrix follows the structure of the
Principles and each disclosure item is intended
to draw out the CCP’s activity, risks and risk
controls. CCPs should attempt to disclose all
elements in the matrix. If an element is not
applicable, or its completion is not practicable,
CCPs should explain the reasons for this in place
of the disclosure. In order for the objectives of
disclosure to be achieved, it is essential that
reporting is accurate. CCPs should ensure
their disclosures are subject to appropriate
quality control. CCPs are encouraged to provide
clarifying remarks alongside their disclosures
where they consider this will aid understanding
or where they consider there may otherwise be
a risk of misinterpretation.

On 7 November 2013 the SEC approved
amendments to treat OTC options cleared

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