The electronic trading rules (Rules) set out in paragraph 18 and Schedule 7 to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission come into effect on 1 January 2014. The Rules apply to all licensed corporations and registered institutions that conduct electronic trading of securities and futures contracts that are listed or traded on an exchange, as well as licensed corporations and registered institutions that provide trading of leveraged foreign exchange contracts electronically by means of internet trading.
Licensed corporations / registered institutions must conduct “appropriate due diligence” on third party-provided electronic trading systems, algorithmic trading systems and trading algorithms they use. To help meet this requirement, various industry associations (including, from the buy-side, the Alternative Investment Management Association and the Hong Kong Investment Funds Association) have collaborated on an Electronic Trading Information Template. The template includes a summary of the Rules and illustrative questions to ask third party providers as part of the due diligence process.
Please refer to our earlier client alert for a summary of how the Rules affect Hong Kong-regulated asset managers.