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ASIFMA Asia Regulatory Review

3 - 10 November 2015 | Issue 276


ASIFMA Annual Conference 2015 to be held on 2-3 December 2015 in Hong Kong
As an industry-wide event, ASIFMA's flagship Annul Conference provides a unique opportunity for global and regional policy makers, high-level regulators and industry representatives from both sell-side and buy-side firms to meet and discuss important issues affecting the development of Asia's capital markets. Register now given seats are limited!



People's Bank of China Welcomes Direct Trading between RMB and Swiss Franc Launched by the China Foreign Exchange Trade System
With the authorization of the People's Bank of China, the China Foreign Exchange Trade System (CFETS) has announced on 9 November, 2015 to launch direct trading between RMB and Swiss Franc (CHF) on the inter-bank foreign exchange market.

China to improve auditing efficiency to support M&A: CSRC
China will adjust the auditing process to support mergers and acquisitions of listed firms, the country's top securities watchdog said. China Securities Regulatory Commission (CSRC) will audit the legal, financial and industrial conditions of the applicants based on their disclosed information and cut the auditing time. (China Daily)

China to restart IPOs
China will restart initial public offerings (IPO) after suspending them in July in the wake of a stock market rout which began in the middle of June, the securities regulator said. Deng Ge, spokesman with the China Securities Regulatory Commission (CSRC), told a press conference that 28 companies will be allowed to go public before the end of this year. (Xinhua)


HKMA - Norman Chan - When the market fails...
Speech by Norman T.L. Chan, Chief Executive, Hong Kong Monetary Authority

HKMA - Statements issued by the Financial Action Task Force on Money Laundering and the Asia/Pacific Group on Money Laundering
The Asia/Pacific Group on Money Laundering (APG) recently issued a public statement, which HKMA would like to draw your attention to.

HKEx to Roll Out Three More London Metal Mini Futures on 14 December 2015
Hong Kong Exchanges and Clearing Limited (HKEx) will introduce London Nickel Mini Futures, London Tin Mini Futures and London Lead Mini Futures contracts for trading in its derivatives market on 14 December 2015. HKEx announced its plans to introduce the new contracts last month during LME Week, an annual metals industry event hosted by the London Metals Exchange (LME), a wholly owned subsidiary of HKEx.

HKEx Introduces 3-month Free Trial Market Data Promotion Programme
Hong Kong Exchanges and Clearing Limited (HKEx) has introduced a major three-month trial programme that runs from now until 31 October 2016 to promote its market data. The scheme includes real-time data and historical data from HKEx's markets in Hong Kong.

HKEx supports programme for Hong Kong's emerging FinTech industry
Hong Kong Exchanges and Clearing Limited (HKEx) announced that it has become a Supporting Organisation of the SuperCharger Accelerator, Hong Kong's first programme dedicated to helping both start-ups and more established financial technology, or FinTech, companies aiming to capture opportunities in Asia's growing markets. The programme leverages on Hong Kong's traditional strength as Asia's finance and technology gateway.

SFC - Launch of SFC Women's Network
The Securities and Futures Commission (SFC) announced that it has established the SFC Women's Network to enhance professional development and inspire women for leadership roles in the SFC. The Women's Network provides a platform for staff, both female and male, to interact and to participate in events, training and other activities which promote interest in and knowledge of women's leadership.


MAS - Cross-Border RMB Flows and Capital Market Connectivity Between China and Singapore to Strengthen
Initiatives to strengthen cross-border Renminbi (RMB) flows and a commitment to collaborate on capital market connectivity between China and Singapore were the key outcomes in financial co-operation arising from the recent State Visit to Singapore by the President of the People's Republic of China, Mr Xi Jinping.

SGX establishes connectivity with CME Group co-location facility in Aurora, Illinois
Singapore Exchange (SGX) announced that it will establish a presence in the CME Group co-location facility based in Aurora, Illinois, to provide direct connectivity for customers between the two facilities. The SGX Chicago Hub, hosted within the CME Group co-location data centre, will enable customers in North America to conveniently connect directly to SGX and access its derivatives trading and market data services.


Bank of Japan - Challenges to Achieving the Price Stability Target of 2 Percent
Speech by Haruhiko Kuroda, Governor of the Bank of Japan.


RBI - Risk Management & Inter-Bank Dealings: Relaxation of facilities for residents for hedging of foreign currency borrowings
With a view to facilitating hedging of long term foreign currency borrowings by residents, it has been decided to permit them to enter in to FCY-INR swaps with Multilateral or International Financial Institutions (MFI/IFI) in which Government of India is a shareholding member subject to the following terms and conditions.

RBI - Corporate Bond Markets in India: A Framework for Further Action
Remarks by Shri Harun R. Khan, Deputy Governor, Reserve Bank of India.


APRA - Six issues for 2016
Speech by Wayne Brres.


Development of Domestic ETF and ETN Market as a Leading Market for Global Asset Management
Korea Exchange (KRX) has analyzed the listing and trading activity of foreign index products in domestic ETF and ETN market from January 1 to October 23, 2015. The analysis showed that the product lineup has been expanded significantly (+ 28 products)* and the size of listing (+ 88.4%) and trading volume (+ 109.5%) have also increased continuously. It is considered that the domestic ETF and ETN market absorbs the increasing demands for foreign direct investment by domestic investors and performs an important role as a global asset management market.


OJK seeks to ease requirements for state firms to go public
The Financial Services Authority (OJK) is seeking to make it easier for state firms to go public on the Indonesian Stock Exchange (IDX) by cutting the steps necessary to do so. OJK commissioner for capital market supervision Nurhaida said that the 25 steps needed for a state-owned enterprise (SOE) to hold initial public offerings (IPOs) would be reviewed and shortened to simplify the process. The procedure for state firms to go public was still longer than the procedure for private firms, Nurhaida said, leading to reluctance to do so among SOEs. (Jakarta Post)

Indonesia regulator to ink bilateral pacts with 6 nations to enable banks to expand in Asia
Indonesia's financial regulator Financial Services Authority (OJK) is looking at entering into bilateral 'reciprocity' agreements with six countries including Singapore, Australia, Myanmar, Vietnam, Cambodia and India next year, a move that will allow its banks easier access as they expand in Asia. The OJK has already entered into similar arrangements with Bank Negara Malaysia, China Banking Regulatory Commission (CBRC), Dubai Financial Service Authority, Banco Central de Timor-Leste and Japan's Financial Services Agency. Chairman of OJK Muliaman Hadad told the media, Indonesia expects to sign the agreements with Singapore, Myanmar, Vietnam, Cambodia, Australia and India in 2016. (Deal Street Asia)

SEC - Public hearing on proposed revision to mutual fund investment rules
The SEC is seeking public comments on the proposed relaxation to the rules governing investment policy of mutual funds offered for sale to accredited investors, i.e., institutional and high net worth investors, to enhance competitiveness of asset management companies and diversify choices of investment for investors with higher risk tolerance. The draft revision aims to allow asset management companies to offer more diversified, complex types of mutual funds similar to those sold in foreign markets, and to introduce investors to more investment opportunities through various types of complex products.

SEC - Public hearing on proposed revision to rules on listed companies' transactions
The SEC is seeking public comments on a proposed amendment to the rules on material transactions and related party transactions to prevent excessive obligations on listed companies and further clarify relevant criteria. The proposed changes include (1) the further clarification of the term, related party, (2) the adjustment of the calculation methods and the transaction size-based execution to simplify the overall procedure, (3) the clearer determination of the roles and responsibilities of company boards of directors and financial advisors to better respond to real practice, and (4) the revision to the criteria for reporting conflicts of interest of company directors.

SEC - Public hearing on proposed revision to public offering rules
The SEC is seeking public comments on a proposed revision to the public offering rules to allow faster and more cost-effective fundraising procedures for listed companies that meet additional criteria. The draft revision aims to streamline the PO application procedures for the offeror who has no records of inappropriate corporate governance practices and whose shares are offered at the market price during the offering period.


Foreign business lobbies ask China to revise cyber insurance draft rules
Foreign business lobbies have asked China to substantially revise proposed cyber security regulations for the insurance industry, signaling a dispute that started with the publication of similar bank technology rules earlier this year may widen. The draft regulations, announced by the China Insurance Regulatory Commission (CIRC) last month, state that insurance companies, along with their holding companies and asset managers, should prioritize the purchase of "secure and controllable" products, including domestic encryption technologies and local hardware and software. More than 20 foreign business lobbies, including the American Chamber of Commerce, the American Council of Life Insurers, and Japan Electronics and Information Technology Industries Association (JEITA), stated that such provisions would run counter to global information security standards, in a joint letter to CIRC which they delivered at the end of last month. (reuters)

Japan FSA - Publication of the Policy Approaches to Strengthen Cyber Security in the Financial Sector
The FSA published the Policy Approaches to Strengthen Cyber Security in the Financial Sector.

December date set for first China-US cyber meetings
The United States and China will hold the first ministerial-level dialogue on cybersecurity in Washington, D.C. on December 1 and 2 of this year, Homeland Security Secretary Jeh Johnson said Wednesday. Regular bilateral meetings were part of a package of agreements - including an anti-hacking pact - reached during Chinese President Xi Jinping's official state visit in September. (The Hill)


FSB - Chair's letter to the G20: Financial Reforms - Achieving and Sustaining Resilience for All
The letter from the FSB Chair to the G20 Leaders in advance of the Antalya Summit reports on progress on the FSB's work and highlights issues that demand the attention of Leaders. It sets out four key points: First, the implementation of agreed reforms has substantially strengthened the resilience of the global system; second, the FSB has now finalised the tools needed to end "Too Big To Fail" in the banking sector; third, the G20 must remain vigilant to new risks and vulnerabilities; and fourth, the FSB is placing greater emphasis on the impact of reforms on emerging and developing economies.

FSB issues final Total Loss-Absorbing Capacity standard for global systemically important banks
The Financial Stability Board (FSB) issued the final Total Loss-Absorbing Capacity (TLAC) standard for global systemically important banks (G-SIBs). The TLAC standard has been designed so that failing G-SIBs will have sufficient loss-absorbing and recapitalisation capacity available in resolution for authorities to implement an orderly resolution that minimises impacts on financial stability, maintains the continuity of critical functions, and avoids exposing public funds to loss.

FSB publishes report on implementation and effects of the G20 financial regulatory reforms
The Financial Stability Board (FSB) published its first annual report to the G20 on the Implementation and effects of the G20 financial regulatory reforms. The report describes progress by FSB member jurisdictions in implementing the financial reforms agreed in the wake of the global financial crisis; presents early analysis on the effects of those reforms; and highlights areas for closer monitoring.

FSB proposes creation of disclosure task force on climate-related risks
The Financial Stability Board (FSB) published a proposal to the G20 for the creation of an industry-led disclosure task force on climate-related risks. The proposal is in response to a request by the G20 in April to review how the financial sector can take account of climate-related issues.

FSB releases report to G20 on the decline in correspondent banking
The Financial Stability Board (FSB) has published a Report to the G20 on actions taken to assess and address the decline in correspondent banking. This report provides an update on work by the FSB in partnership with other organisations to examine the extent and causes of banks' withdrawal from correspondent banking and the implications for affected jurisdictions, including risks of financial exclusion, particularly where it affects flows such as remittances which are a key source of funds for people in many developing countries.

FSB releases progress report on reducing misconduct risk in the finance industry
The Financial Stability Board (FSB) has published a progress report for the G20 on the FSB's work on addressing misconduct in the financial sector. The progress report on the Measures to reduce misconduct risk sets out details about the FSB-coordinated work to address misconduct in the financial sector and the timeline for the actions. That work includes: considering whether post crisis reforms to incentives are sufficient to address misconduct risks; and whether steps are needed to improve global standards of conduct in the fixed income, commodities and currency (FICC) markets, including, including improvements in the integrity and reliability of benchmarks.

FSB reports describe progress in implementing OTC derivatives market reforms, and highlights where further work is needed

The Financial Stability Board (FSB) released two reports on implementation of the reforms to over-the-counter (OTC) derivatives market agreed by the G20.
- The Thematic Peer Review of OTC Derivatives Trade Reporting
- The OTC Derivatives Market Reforms: Tenth Progress Report on Implementation

BIS - Haircut floors for non-centrally cleared securities financing transactions - consultative document
In October 2014, the FSB published a report on Strengthening Oversight and Regulation of Shadow Banking - Regulatory framework for haircuts on non-centrally cleared securities financing transactions and introduced a framework for haircut floors for non-centrally cleared SFTs. As part of this framework, the FSB recommended that the Basel Committee on Banking Supervision (BCBS) incorporate the haircut floors into the capital requirements for non-centrally cleared SFTs by setting higher capital requirements for transactions with haircuts traded below the haircut floors. The objective of the BCBS proposal is to create incentives for banks to set their collateral haircuts above the floors rather than hold more capital.

BIS - OTC derivatives statistics at end-June 2015
Developments in the latest OTC derivatives statistics are summarised in the Statistical release, together with charts showing historical data. Additional data are available on the BIS website, where they can be viewed as tables in PDF or browsed in the BIS Statistics Explorer. The OTC derivatives statistics at end-December 2015 will be released no later than 13 May 2016.

BIS - Reports related to Total Loss Absorbing Capacity (TLAC) published by the Basel Committee
The Financial Stability Board (FSB) published its Principles on the Loss Absorbing and Recapitalisation Capacity of G-SIBs in Resolution and Total Loss Absorbing Capacity (TLAC) term sheet. In support of this effort, the Basel Committee on Banking Supervision has released two related documents. The Basel Committee's TLAC Quantitative Impact Study (QIS) Report analyses the TLAC levels and shortfalls at global systemically important banks (G-SIBs) based on the FSB's November 2014 consultative version of the TLAC term sheet. The quantitative impact study is a critical component of the impact analysis of the TLAC regime. In particular, it provides the main data set that is the basis of the analysis Assessing the economic costs and benefits of TLAC implementation, which was led by staff of the Bank for International Settlements.

BIS - Haircut floors for non-centrally cleared securities financing transactions - consultative document
In October 2014, the FSB published a report on Strengthening Oversight and Regulation of Shadow Banking - Regulatory framework for haircuts on non-centrally cleared securities financing transactions and introduced a framework for haircut floors for non-centrally cleared SFTs. As part of this framework, the FSB recommended that the Basel Committee on Banking Supervision (BCBS) incorporate the haircut floors into the capital requirements for non-centrally cleared SFTs by setting higher capital requirements for transactions with haircuts traded below the haircut floors. The objective of the BCBS proposal is to create incentives for banks to set their collateral haircuts above the floors rather than hold more capital.

The LEI ROC published Progress Report on the Global LEI System and regulatory uses of the LEI
The LEI ROC report was sent to the FSB and G20. The report can be found on this link.

World Exchanges Agree Enhanced Sustainability Guidance
The World Federation of Exchanges has presented recommendations to its member exchanges on how to implement their sustainability policies, the culmination of a year-long project by its Sustainability Working Group. The guidance, presented at the WFE's General Assembly in Doha on October 20, is designed to be implemented by member exchanges on a voluntary basis. The WFE Guidance & Recommendations identifies material ESG metrics which exchanges can incorporate into disclosure guidance to companies listed on their markets. Specifically, the enhanced guidance highlights 34 key performance indicators, including energy consumption, water management, CEO pay ratio, gender diversity, human rights, child and forced labour, temporary worker rate, corruption and anti-bribery, tax transparency in addition to other corporate policies.


Federal Reserve Announces Sixth Triennial Study to Examine U.S. Payments Usage
The Federal Reserve announced plans to conduct its sixth triennial study to determine the current aggregate volume and composition of electronic and check payments in the United States. The study builds upon research begun by the Federal Reserve in 2001 to provide the public and the payments industry with estimates and trend information about the evolving nature of the nation's payments system. A public report containing initial topline estimates is expected to be published in December 2016.

U.S. Federal Reserve - Shared Responsibility for the Regulation of International Banks
Speech by Governor Daniel K. Tarullo

CFTC Staff Issues Time-Limited Extension of Swap Data Reporting Relief for Certain Swap Dealers and Major Swap Participants Established under the Laws of Australia, Canada, the European Union, Japan or Switzerland
The U.S. Commodity Futures Trading Commission’s (Commission) Division of Market Oversight (Division) issued a time-limited no-action letter that extends relief provided to certain Commission-registered swap dealers (SD) and major swap participants (MSP) in CFTC Letter No. 14-141.

OTC Derivatives Regulators Deliver Report to the G20 Leaders
The OTC Derivatives Regulators Group (ODRG) delivered a report to the G20 Leaders that provides an update regarding the ODRG's continuing effort to identify and resolve cross-border issues associated with the implementation of the G20 OTC derivatives reform agenda. The ODRG includes the principals of those regulatory authorities with responsibility for the regulation of OTC derivatives markets in Australia, Brazil, the European Union, Hong Kong, Japan, Ontario, Quebec, Singapore, Switzerland, and the United States.

CFTC Staff Publishes Responses to Frequently Asked Questions Regarding Commission Forms CPO-PQR and CTA-PR
The U.S. Commodity Futures Trading Commission's Division of Swap Dealer and Intermediary Oversight (DSIO) published responses to frequently asked questions concerning Commission Forms CPO-PQR and CTA-PR (FAQs). The FAQs address issues ranging from Form CPO-PQR and Form CTA-PR filing mechanics and filing deadlines to technical questions regarding asset reporting classification. DSIO staff intends to update the FAQs on an as needed basis to clarify issues for the broadest set of filers.

CFTC's Division of Market Oversight Extends Time-Limited No-Action Relief for Swap Execution Facilities from Certain "Block Trade" Requirements
The U.S. Commodity Futures Trading Commission's (Commission) Division of Market Oversight (Division) extended time-limited no-action relief to Swap Execution Facilities (SEFs) from certain requirements in the definition of "block trade" in Commission regulation Section 43.2. Commission regulation Section 43.2 defines a "block trade" as, among other things, a publicly reportable swap transaction that "[o]ccurs away from the registered [SEF]'s or [DCM]'s trading system or platform and is executed pursuant to the registered [SEF]'s or [DCM]'s rules and procedures."


EBA announces details of 2016 EU-wide stress test
The European Banking Authority (EBA) published its 2016 EU-wide stress test draft methodology for discussion. The stress test will be formally launched in the first quarter of 2016 and will cover over 70% of the EU banking sector and will assess EU banks' ability to meet relevant supervisory capital ratios during an adverse economic shock. The results will inform the 2016 Supervisory Review and Evaluation Process (SREP), acting as a challenge to banks' forward looking capital plans. The exercise will also provide market participants with a consistent basis to compare and assess the resilience of EU banks. The list of institutions participating in the exercise is also released.

EBA finds further increase in EU banks capital ratios in 2015
In its risk dashboard for the EU banking sector published today, the European Banking Authority (EBA) gives an overview of the health of EU banks for the second quarter of 2015. While capital ratios have increased, the quality of loan portfolios remains weak, but EU banks profitability has increased compared to 2014. The EBA risk dashboard summarises the main risks and vulnerabilities in the banking sector on the basis of the evolution of a set of key risk indicators across the EU.

ECB - How does China's slowdown impact the euro area?
China's economic slowdown is likely to have only a modest impact on euro area GDP as the country accounts for a relatively small share of euro area exports, says the Economic Bulletin. But a further slowdown could affect the euro area more widely if it resulted in global uncertainty.

ESMA publishes responses to the Consultation on Draft implementing technical standards under MiFID II
The European Securities and Markets Authority (ESMA) has published the responses received to the Consultation on Draft implementing technical standards under MiFID II.

ESMA consults on indirect clearing arrangements
The European Securities and Markets Authority (ESMA) has opened a public consultation on draft requirements regarding indirect clearing. Indirect clearing is in practice understood as when clients of a clearing member sign up clients of their own. ESMA's draft rules on indirect clearing both refer to the European Market Infrastructure Regulation (EMIR) and the Markets in Financial Instruments Regulation (MiFIR) as they cover arrangements for OTC derivatives and exchange-traded derivatives (ETD) respectively. The aim of this consultation is to address issues raised by stakeholders in prior consultations and ensure consistency in the application of MiFIR and EMIR.

ESMA publishes MAD/MAR Q&A
The European Securities and Markets Authority (ESMA) has issued a Questions and Answers (Q&A) document regarding the implementation of the Market Abuse Regulation (MAR). The purpose of this document is to promote convergent implementation and application of the market abuse regime by providing responses to specific issues raised by the general public, market participants or competent authorities. The document is aimed at national competent authorities, investors and market participants to ensure supervisory convergence by providing clarity on existing market abuse requirements, rather than creating an extra layer of requirements.

FCA - Policy proposals and Handbook changes related to the implementation of the Market Abuse Regulation
In this consultation document, the FCA set out their proposals for the necessary changes to the FCA Handbook required to implement the new Market Abuse Regulations (EU MAR). We seek feedback on these proposals and also invite comments on the different options for implementation the regime offers EU Member States in two areas.

FCA - Regulatory fees and levies: policy proposals for 2016/17
This Consultation Paper covers the first part of the FCA's annual fees cycle, where in October/November the FCA consulted on any changes to the policy on how fees and levies are raised. Depending on the proposed policy change, the FCA would expect to provide feedback on the responses received to this consultation in the following February or March Handbook Notice.

FCA - Moving towards a sustainable model of regulation
Speech by Tracey McDermott, Acting Chief Executive, FCA.


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