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ASIFMA Asia Regulatory Review
 


9 - 15 December 2015 | Issue 280

Spotlight

China central government solicits online advice on Five-year Plan
The official website of China's central government, gov.cn began to accept suggestions and opinions from the general public on the 13th Five-Year Plan (2016-2020), the national economic and social development roadmap for the next five years. Major portals including xinhuanet.com and sina.com are collaborating with the government to collect viewpoints. Submissions will be accepted until Jan. 15, 2016. (Xinhua)


Updates

CHINA

Draft law puts information security at center stage
Discussion of a new comprehensive cybersecurity law is accelerating in China, to address security problems originating at home and abroad and to improve the Internet space overall, according to experts in online security and law. Calls for stronger cybersecurity laws in China have been amplified since Edward Snowden revealed the US government's secret spying program two years ago, the specialists said as they applauded a draft law released earlier this year. "The legislation reflects that our leadership upholds cybersecurity, and the process has been accelerated," said Zuo Xiaodong, vice-president of the China Information Security Research Institute. "Some authorities in industry and in government information departments have studied various approaches to rules for 10 years, but there was no written version until the draft emerged." (China Daily)

China securities regulator to step up inspection on OTC equity markets
China's securities regulator said on Friday that it would step up supervision of regional over-the-counter equity markets for possible illegal activities. China Securities Regulatory Commission (CSRC) has found that some companies illegally sold shares to investors, and promised fixed returns, claiming that they would soon be traded on OTC exchanges, according to a statement posted on CSRC's official microblog. CSRC said it has asked local governments to help crack down on such illegal activities. (Reuters)

HONG KONG

HKMA - Fifth Meeting of Hong Kong - London RMB Forum
The private-sector led Hong Kong - London Forum to promote cooperation on the development of international renminbi (RMB) business (the "Forum") convened for its fifth meeting in Hong Kong. In tandem with the accelerating internationalisation of RMB, Forum participants agreed to step up their collaboration efforts and engagement as follows: Capitalising on the expanding channels for cross-border RMB flows; Making the most of the growing trend of Chinese capital and companies going global as the implementation of the 'Belt and Road' initiative and the Asian Infrastructure Investment Bank gathers pace; Expanding the range of RMB products and the breadth and depth of the RMB capital markets; and Strengthening the market infrastructure to enhance liquidity and service increasing payment needs.

HKMA - Keynote Address by Eddie Yue at the 5th Hong Kong - London RMB Forum, Seminar on RMB Business
by Eddie Yue, Deputy Chief Executive, Hong Kong Monetary Authority

HKMA - Eddie Yue on The Long-Term Growth Portfolio of the Exchange Fund - Focusing on Future, Striving for Growth (1 of 2) (English translation)
In his Budget Speech this February, the Financial Secretary earmarked part of the fiscal reserves and a portion of future budget surpluses to establish a Future Fund. The Fund will serve as long-term savings for Hong Kong and will be placed in long-term investments to achieve higher returns. On the recommendation of the Working Group on Long-Term Fiscal Planning, the Government will entrust the management of the Future Fund to the HKMA.

HKEX - Exchange Publishes Guidance Letter on Trading Halts in Securities of Listed Issuers
The Stock Exchange of Hong Kong Limited (the Exchange), a wholly owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx) issued a guidance letter on trading halts in securities of listed issuers. The letter sets out the criteria for and principles of trading halts under the current rules and provides guidance on good practices about trading halts pending disclosures of material information by listed issuers. It also facilitates investors' understanding of the circumstances where trading halts are necessary.

SINGAPORE

SGX announces successful launch of SGX Bond Pro
SGX Bond Pro has been established under SGX's subsidiary, SGX Bond Trading ("SGX BT"), a licenced Recognised Market Operator. It connects buyers and sellers of Asian bonds and provides them with multiple trading protocols that cater to their liquidity needs. The trading protocols were developed in consultation with the industry to facilitate how participants, including accredited investors such as global asset managers, private and investment banks, want to access liquidity.

SGX named Global Exchange of the Year by FOW
Singapore Exchange (SGX) was named "Global Exchange of the Year" for the first time at the recent Futures & Options World (FOW) International Awards ceremony, as well as "Exchange of the Year - Asia, Australasia and MEA." On announcing the award, FOW cited SGX's strong volume growth through 2015 with trading levels up more than 60% year-on-year, as well as continued innovation across the risk management portfolio. SGX was credited for expanding its offshore Asian equity derivatives suite, the growth of its commodities clearing and OTC business and for continuing to grow the currency futures portfolio and turnover.

JAPAN

The Bank of Japan - Semiannual Report on Currency and Monetary Control (Summary)
The semi-annual report was submitted to the Diet in December 2015. The report outlines the economic and financial developments in Japan.

The Bank of Japan - Haruhiko Kuroda: The current situation in Japan s financial system and macroprudential policy
Remarks by Mr Haruhiko Kuroda, Governor of the Bank of Japan.

INDIA

RBI introduces Cross Currency Futures and Exchange Traded Cross Currency Option Contracts
The Reserve Bank of India has issued guidelines for introduction of cross currency futures and exchange traded cross currency option contracts in the currency pairs of Euro (EUR)-US Dollar (USD), Pound Sterling (GBP)-USD and USD- Japanese Yen (JPY). Further, exchange traded option contracts in the currency pairs of EUR-Indian Rupee (INR), GBP-INR and JPY-INR have also been introduced in addition to the existing USD-INR pair. The cross currency contracts shall enable direct hedging of exposures in foreign currencies and facilitate execution of cross-currency strategies by market participants.

RBI - Guidelines on trading of Currency Futures and Exchange Traded Currency Options in Recognized Stock Exchanges - Introduction of Cross-Currency Futures and Exchange Traded Option Contracts
Market Participants, i.e., residents and FPIs, are allowed to take positions in the cross-currency futures and exchange traded cross-currency option contracts without having to establish underlying exposure subject to the position limits as prescribed by the exchanges.


SEBI - Outsourcing by Depositories
The Depository System Review Committee (DSRC) examined the outsourcing practice followed by the Depositories on various parameters. Based on recommendations by DSRC, the depositories are advised to follow the circular.

SEBI - Testing of software used in or related to Trading and Risk Management
Due to technological developments and innovations, currently the members of exchanges have multiple options for using software i.e. either exchange provided or in-house developed software which is being used for trading and risk management related activities. In the securities market, in order to avoid any disruption like event due to malfunctioning of software used by the trading members / brokers, it was felt necessary to strengthen the process of testing of software before deployment.

AUSTRALIA

RBA - Bilateral Local Currency Swap Agreement with Bank Indonesia
The Reserve Bank of Australia signed a bilateral local currency swap agreement with Bank Indonesia, which is effective as of 15 December 2015. The agreement allows for the exchange of local currencies between the two central banks of up to A$10 billion or IDR 100 trillion. The effective period of the facility will be three years, and could be extended by mutual consent of both sides.

SOUTH KOREA

KRX - Improvement of Lockup System to Remove Regulatory Obstacles for Listing in KOSPI market
The Korea Exchange (KRX) revised the 'Enforcement Rules of KOSPI Market Listing Regulation.' The lockup system which was a too strict compared to other exchanges and criticized as a hurdle to be listed on the KRX market was amended and criteria of appropriate debt ratio is specified. Also, a clause related to the corporate social responsibility was added.

INDONESIA

BI working on integrated national payment system
Bank Indonesia (BI) has reaffirmed its commitment to a long-delayed master plan for an integrated payment system, called the National Payment Gateway (NPG), as part of the central bank's drive to reduce cash transactions and boost efficiency. BI deputy governor Ronald Waas said the road map for the NPG, which was expected to be completed next year, would focus on building interoperability between local interbank network providers, also known as switching companies, to support the rise of electronic payments. (Jakarta Post)

PHILIPPINES

Purisima urges PSE to link up with Asean
Finance Secrtary Cesar Purisima urged the Philippine Stock Exchange to finally join the Asean trading link after several years of delay in order to boost the local capital markets. Speaking during the general membership meeting of the Shareholders Association of the Philippines, Purisima said while there would be winners and losers in the planned Asean trading link, the integration was expected to encourage more people into invest in the stock market. Purisima said some sectors, including the stockbrokers, feared they might lose their business once the PSE joined the Asean trading link. (The Standard)

DATA & CYBERSECURITY

First EU-wide rules to improve cybersecurity: deal with European Parliament
On 7 December 2015, the Luxembourg presidency of the Council reached an informal agreement with the European Parliament on common rules to strengthen network and information security across the EU. The new directive will set out cybersecurity obligations for operators of essential services and digital service providers. These operators will be required to take measures to manage cyber risks and report major security incidents, but the two categories will be subject to different regimes.


INTERNATIONAL

The Financial Action Task Force leads renewed global effort to counter terrorist financing
The FATF will adapt its strategy in order to better understand and reflect the changing nature of the terrorist financing risks, including by strengthening the existing measures, and enhancing operational information sharing to help counter the risks by: Understanding the impact of recent action against ISIL, Improving the exchange of information and Strengthening the international standards and their implementation.

IOSCO Publishes third Hedge Funds Survey report
The aim of the IOSCO survey is to gather data from hedge fund managers and advisers about the markets in which they operate, their trading activities, leverage, funding and counterparty information. It forms part of IOSCO's efforts to support the G20 initiative to mitigate risk associated with hedge funds. The report explains the results of the third IOSCO survey and provides an overview of the hedge fund industry as of 30th September 2014. The IOSCO Hedge Fund Survey remains the only global view on hedge funds from a regulatory perspective and is therefore of key interest to the wider global debate on related issues.

BIS - Revisions to the Standardised Approach for credit risk - second consultative document
The second consultative document on Revisions to the Standardised Approach for credit risk forms part of the Committee's broader review of the capital framework to balance simplicity and risk sensitivity, and to promote comparability by reducing variability in risk-weighted assets across banks and jurisdictions. These proposals differ in several ways from an initial set of proposals published by the Committee in December 2014. Response deadline: 11 March 2016.

BIS - Exchange rates and the transmission of global liquidity
Speech by Mr Hyun Song Shin, Economic Adviser and Head of Research of the BIS, at the Bank of Korea-IMF conference "Leverage in Asia: Lessons from the Past, What's New Now?, and Where to Watch Out For?", 11 December 2015.

ASEAN urged to ease rules on foreign labor
Experts have urged Southeast Asian countries to ease regulations on the exchange of workers across the region, arguing that the cross-border placement of skilled human resources would boost growth in the ASEAN Economic Community (AEC). Asian Development Bank (ADB) senior economist Guntur Sugiyarto said most ASEAN countries maintained a protectionist stance on foreign employees, which would hamper the exchange of skills in the upcoming single market. (Jakarta Post)

UNITED STATES

CFTC to Hold an Open Commission Meeting on December 16th to Consider Final and Proposed Rules
U.S. Commodity Futures Trading Commission (CFTC) Chairman Tim Massad announced that the Commission will hold an open meeting on Wednesday, December 16, 2015 at 10:30 a.m. to consider the following: Proposed Rule: DCR System Safeguards; Proposed Rule: DMO System Safeguards Testing Requirements; and Final Rule: Margin for Uncleared Swaps.

SEC Proposes New Derivatives Rules for Registered Funds and Business Development Companies
he Securities and Exchange Commission today voted to propose a new rule designed to enhance the regulation of the use of derivatives by registered investment companies, including mutual funds, exchange-traded funds (ETFs) and closed-end funds, as well as business development companies. The proposed rule would limit funds' use of derivatives and require them to put risk management measures in place which would result in better investor protections.

EUROPE

European Council - Manipulation of market benchmarks: Council confirms agreement with EP on tougher rules
On 9 December 2015, the Permanent Representatives Committee approved, on behalf of the Council, a compromise agreed with the European Parliament on new rules aimed at ensuring greater accuracy and integrity of benchmarks in financial instruments. "The adoption of this regulation will help restore trust in the integrity of benchmarks and enhance their robustness and reliability, thereby strengthening confidence in the financial markets and preventing new manipulation scandals," said Pierre Gramegna, minister for finance of Luxembourg and president of the Council.

EBA consults on assessment methodology on the use of internal models for market risk
The European Banking Authority (EBA) launched a consultation on its draft Regulatory Technical Standards (RTS) that specify the conditions under which competent authorities assess the significance of positions included in the scope of market risk internal models, as well as the methodology that competent authorities shall apply to assess an institution's compliance with the requirements to use an Internal Model Approach (IMA) for market risk. These draft RTS are a key component of the EBA's work to ensure consistency in models outputs and comparability of risk-weighted exposures and will contribute to harmonise the supervisory assessment methodology across all EU Member States. The consultation runs until 13 March 2016.

EBA issues recommendations for sound prudential regime for investment firms
The European Banking Authority (EBA) published its report in response to the European Commission's call for advice on the suitability of certain aspects of the prudential regime for investment firms. This report, done in consultation with the European Securities Market Authority (ESMA), presents the EBA's findings and lists a series of recommendations aiming to provide a more proportionate and less complex prudential regime for investment firms, based on appropriate risk sensitivity parameters.

EBA consults on draft Guidelines on ICAAP and ILAAP information collected for SREP purposes
The European Banking Authority (EBA) launched a public consultation on draft Guidelines on the collection of information related to the internal capital adequacy assessment process (ICAAP) and the internal liquidity adequacy assessment process (ILAAP). These draft Guidelines aim at facilitating the consistent approach to the supervisory assessment of ICAAP and ILAAP frameworks as well as the assessment of reliability of institutions' own capital and liquidity estimates as part of the supervisory review and evaluation process (SREP) following the criteria and methodologies specified in the EBA Guidelines on common procedures and methodologies for SREP. The public consultation runs until 11 March 2016.

EBA consults on cooperation and exchange of information for passporting under PSD2
The European Banking Authority (EBA) launched a consultation on its draft technical standards on the framework for cooperation and exchange of information between competent authorities for passporting under Article 28(5) of the revised Payment Services Directive (PSD2). The technical standards will ensure that information about those payment institutions that carry out business in one or more EU Member States is exchanged consistently between the national authorities of the home and host Member States. The consultation runs until 11 March 2016.

EBA issues revised list of ITS validation rules
The European Banking Authority (EBA) issued a revised list of validation rules in its Implementing Technical Standards (ITS) on supervisory reporting, highlighting those which have been deactivated either for incorrectness or for triggering IT problems. Competent Authorities throughout the EU are informed that data submitted in accordance with these ITS should not be formally validated against the set of deactivated rules.

ESMA issues standards on reporting, cooperation & suspensions under MiFID II
The European Securities and Markets Authority (ESMA) has published Implementing Technical Standards (ITS) regarding the implementation of the Market in Financial Instruments Directive (MiFID II). ESMA's ITS translate how the legislation will apply in practice to market participants, market infrastructures and national supervisors.

ESMA consults on margin period of risk for CCP's client accounts
The European Securities and Markets Authority (ESMA) published a Consultation Paper on the Review of Article 26 of RTS No 153/2013 regarding the European Market Infrastructure Regulation (EMIR). In relation to the relevant Regulatory Technical Standard (RTS) ESMA is seeking feedback on deals with the length of the margin period of risk (MPOR) for CCPs' client accounts. The MPOR determines the amount of initial margins collected by a CCP. The ESMA proposal is to reduce from 2-day to 1-day the MPOR for gross omnibus accounts and individual segregated accounts for exchange traded derivatives and securities. The consultation closes on 1st February 2016.


ESMA consults on improved access to trade repository data
The European Securities and Markets Authority (ESMA) has published a consultation paper which proposes to enhance the current functionalities offered by trade repositories (TRs) for data access under the European Market Infrastructure Regulation (EMIR).

ESMA announces date of open hearing for validation and review of CRA methodologies
The European Securities and Markets Authority (ESMA) will hold an open hearing on the issues set out in its Discussion Paper on the Validation and Review of Credit Rating Agencies' methodologies published in November 2015.

ESMA - Steven Maijoor delivers keynote at L'Agefi Regulation Financiere 2015 on CMU and bond markets
Steven Maijoor, ESMA Chair, delivered the keynote speech at L'Agefi's Regulation Financiere 2015 event on bond market transparency and Capital Markets Union.

The Bank of England - Consultation Paper: The Bank's approach to setting a minimum requirement for own funds and eligible liabilities (MREL)
As announced in the "Framework of capital requirements for UK banks" published on 1 December 2015, the Bank of England will launch a consultation on its approach to setting a minimum requirement for own funds and eligible liabilities (MREL) for all UK banks, building societies and certain investment firms.

The FCA sees improvements in suitability at wealth managers, but concerns remain
Wealth managers and private banks have made progress in demonstrating the suitability of their clients' portfolios, a thematic review by the Financial Conduct Authority (FCA) has found.

FCA - Flows of confidential and inside information
This report presents the findings from the FCAs review of flows of confidential and inside information.

FCA - Strengthening accountability in banking: Final amendments to the Decision Procedure and Penalties Manual and the Enforcement Guide
In this policy statement, we set out our amendments to the Decision Procedure and Penalties Manual (DEPP) and the Enforcement Guide (EG), to give guidance on how we will enforce the new accountability regime (including the Senior Managers Regime and the Certification Regime), and use the new powers created by the Financial Services (Banking Reform) Act 2013 (the Banking Reform Act).

 
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