Hong Kong Goes Electronic

Terry Flanagan

The Asia Securities Industry and Financial Markets Association (ASIFMA) has selected Markit to provide the online system to facilitate compliance with Hong Kong’s Securities and Futures Commission’s (SFC) new electronic trading rules.

The new rules take effect on January 1, 2014 and require Hong Kong-licensed brokers to attest that their electronic trading systems are properly supervised, tested and risk managed. The rules also require customers to acknowledge that they understand the algorithms and other technologies used by their brokers.

Markit will use its Counterparty Manager technology to help financial institutions exchange the information required under the new rules (SFC Paragraph 18 and Schedule 7) easily and efficiently. The technology will offer an electronic format of the questionnaire designed by a number of industry associations to assist the buyside and brokers in exchanging the required information.

“For several months now, the Asia TraderForum buyside industry group has been seeking an efficient solution to facilitate compliance with the SFC’s new electronic trading rules,” said George Molina, senior vice president and director of Asian trading at Franklin Templeton Investments. “We are pleased the industry has selected a single platform to assist us in managing the process.”

Using the Markit Counterparty Manager regulatory module, broker dealers will upload their answers as required in the questionnaire and disseminate them to their buyside counterparties. Buyside firms will be able to review the answers from each broker dealer and electronically acknowledge that they have done so. This acknowledgement will be transmitted directly to their counterparties, allowing sellside institutions to see which customers have fulfilled their compliance requirements.

“The industry standard questionnaire facilitates and greatly simplifies the due diligence process required to comply with the new Hong Kong Securities and Futures Commission rules,” said Mark Austen, CEO of ASIFMA. “However, without a technology solution, exchanging information would remain a manual, bilateral process. Markit’s technology will replace the need for a mass of bilateral conversations and the management of a large volume of pages of documentation that would be required in the absence of an automated solution.”

Markit Counterparty Manager is used by market makers, asset managers and corporations for trading account onboarding and maintenance, reference data management, regulatory compliance and other reporting. Last year, Markit used Counterparty Manager to deliver the ISDA Amend platform, which facilitates compliance with Dodd-Frank, and recently extended the service to help businesses comply with Emir.

Separately, Hong Kong-based CLSA has selected Ullink’s pre trade risk management system for its pan Asian trading activity.

The Ullink platform includes electronic client order collection, and pre-trade risk management for Asian markets. The entire setup will enable CLSA to aggregate the risk management over multiple clients and multiple markets.

CLSA has over 25 years of experience specializing in Asian equity markets and has grown to become one of Asia’s leading and independent brokerages. Branding itself as a gateway to global exchanges, CLSA offers a wide range of trading products and platforms to meet clients’ bespoke investment needs.

“We appreciate the flexibility and robustness of the pre trade risk management system designed by Ullink,” said Andy Maynard, global head of trading and execution at CLSA. “The risk granularity and comprehensiveness of their system is quite unique in the market today.”

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