The risk mitigation requirements apply to any LC (regardless of the regulated activity for which it is licensed) that is a party to uncleared OTC transactions and (ii) to a type 9 LC (i.e. an asset manager) providing a management service for a portfolio of OTC derivatives for a collective investment (CIS) that it manages, as regards non-cleared OTC transactions; that it carries out on behalf of this CIS, with the exception of the risk mitigation requirements addressed by the management body of the CIS or its delegate. The requirements of the CFS apply to all LCs, regardless of the size of their portfolio of centrally uncleared OTC derivatives and the purpose for which the derivative was used (i.e. hedging or not). The RISK MITIGATION requirements of the CFS do not apply to registered persons. The amending agreement contains provisions on portfolio comparison, dispute settlement and (unilateral) confirmation of trade. These provisions are largely in line with those of the bilateral agreement to amend the HKMA risk mitigation requirements, published by ISDA in April 2017, to ensure operational consistency for participants (or groups) that may be subject to both HKMA and SFC risk reduction requirements. The SFC`s assessment requirements are stricter than those imposed by the HKMA and require an LC to have assessment processes in general and not just for margin exchange purposes. The amendment agreement therefore contains additional provisions for evaluation. the amendment agreement covers the documentary aspect of certain risk reduction requirements; Meeting the new requirements will likely require further operational and compliance changes within the LC. The change agreement is not the only way for LCs to implement the documentation changes related to the new requirements. LCs is free to adopt other documentation solutions to meet the new requirements. On September 1, 2019, the risky requirements for non-centralized OTC derivatives imposed by the Securities and Futures Commission (SFC) on licensed companies (SFC) came into effect.
The International Swaps and Derivatives Association, Inc. (ISDA) has published a bilateral amendment agreement where by which industry participants can amend their hedging master agreements. Portfolio Agreement – LCs are required to define and implement policies and procedures to ensure that essential conditions are exchanged and that valuations are regularly compared with counterparties for all otc derivatives portfolios that are not centrally cleared. The LC should adopt a risk-based approach, so that the frequency should be proportionate to the risk exposure profile of the counterparty. Risk mitigation requirements are imposed on LCS as behavioural requirements in the CFS Code of Conduct (in a new Annex 10). These requirements are as follows: in order to facilitate industry compliance with certain risk reduction requirements of the SFC, the International Swaps and Derivatives Association, Inc. .