Consultation conclusions on changes to position limit regime

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Authored by: Pinky Siu

The Hong Kong Securities and Futures Commission (SFC) published its consultation conclusions on the proposed changes to the position limit regime for the derivatives market on 5 June 2023, following a further consultation in 2022.

Our article in May 2022 highlighted the SFC’s clarifications as to how the Securities and Futures (Contract Limits and Reportable Positions) Rules (Rules) are to be applied to unit trusts and mutual funds. In our article in December 2022, we discussed the SFC’s responses to the industry’s comments.

In the consultation conclusions, the SFC concluded that it would be appropriate for the person responsible for the day-to-day operation of funds (i.e., the asset manager) to have the primary responsibility for compliance with the position limit and reporting under the Rules at the individual fund and sub-fund level. However, as the Rules apply to any person who “holds or controls” positions, trustees are still subject to the requirements of the Rules. In this connection, if a trustee has measures in place to ensure an asset manager managing its unit trusts has observed position limit compliance and reported positions according to the Rules, the SFC will consider that the trustee has discharged its obligations under the Rules. The SFC will update their Guidance Note on Position Limits and Large Open Position Reporting Requirements to specify the considerations that will be taken into account in determining trustees’ compliance.

The SFC will also proceed with the other proposals set out in the consultation paper, which include amendments to the Rules in responses to the proposed enhancements to the exchange-level position limit regime initiated by the Hong Kong Exchanges and Clearing Limited.

Subject to the legislative process, it is expected the amendments to the Rules will be effective in December 2023. Asset managers and trustees are reminded to observe and put in place measures for compliance with the new requirements.

Key Contacts

Pinky Siu

Partner | Financial Services

Email or call +852 2825 9568