SFC concludes consultation and further consults on changes to financial resources rules

24 Jul 2017

The Securities and Futures Commission (SFC) today published consultation conclusions on the proposed regulatory capital regime for licensed corporations engaged in over-the-counter derivatives activities and other proposed changes to the Securities and Futures (Financial Resources) Rules (FRR) (Notes 1 and 2).

After carefully considering the comments received (Note 3), the SFC will proceed to implement the proposed regime subject to certain modifications, which include reducing the minimum capital requirements for fund managers’ central dealing desks which meet certain conditions and extending the transitional period for full compliance with the new FRR requirements from six months to one year. The SFC will also introduce into the FRR an internal models approach benchmarking to the latest standards (Note 4) set by the Basel Committee on Banking Supervision. 

“The proposed changes are necessary to bring our regulation in line with international standards,” said Mr Ashley Alder, the SFC’s Chief Executive Officer. “We are confident that the proposed regime will help ensure stability in our financial markets and facilitate the development of Hong Kong as a derivatives hub and a risk management centre in Asia.”

To reflect recent market developments, the SFC seeks to further consult on a number of modified and additional FRR proposals, such as adding four Mainland commodity exchanges (Note 5) to the list of specified exchanges under the FRR to facilitate licensed corporations’ participation in those markets and recognising credit ratings issued by Fitch Ratings. In addition, this consultation covers a set of draft FRR amendments for implementing those proposals which are not specific to over-the-counter derivatives activities (Note 6). The consultation period ends on 23 August 2017.

The public is invited to submit their comments to the SFC on the modified and additional proposals and the draft FRR amendments by 23 August 2017. Written comments may be sent online via the SFC website (www.sfc.hk), by email to frr_consultation@sfc.hk, by post or by fax to 2523 4598.



  1. On 17 July 2015, the SFC issued a consultation paper on proposed changes to the FRR relating to capital and other prudential requirements for licensed corporations engaged in over-the-counter derivatives activities and certain other areas.
  2. As part of this exercise, the SFC also concluded the May 2011 consultation on a proposal to update the list of specified exchanges in the FRR. 
  3. A total of 17 written submissions were received from various market practitioners, professional firms and industry associations in response to the proposals set out in the consultation paper.
  4. These include allowing the use of expected shortfall as the measurement of market risk and requiring the use of a non-model-based method to calculate the capital floor. 
  5. These include the Dalian Commodity Exchange, Shanghai Futures Exchange, Shanghai International Energy Exchange and Zhengzhou Commodity Exchange.
  6. These amendment rules will be implemented separately following the further consultation. See Appendix 1 in the consultation conclusions paper for details.

Page last updated : 24 Jul 2017