Final draft ¨CHong Kong margin
and other risk mitigation
standards for non-centrally
cleared OTC derivatives
In December 2016, the Hong Kong Monetary Authority (HKMA) released a final draft of
Supervisory Policy Manual (SPM) CR-G-14, which contains margin requirements and
risk mitigation standards (RMS) for non-centrally cleared over-the-counter (OTC)
derivative transactions undertaken by authorised institutions (AIs). Regulators in other
jurisdictions, including Europe, the US, Australia, India, Japan and Singapore, have also
released their own versions of these rules. What impact will the new margin
requirements have on banks in Hong Kong
Requirement for margin to be posted/collected in respect of transactions
between an AIand a covered entity
Under the new requirements, a non-centrally cleared OTC derivative transaction between an AI and a covered
entityˉ (i.e. a financial counterparty or a significant non-financial counterparty) entered into after the relevant
effective date may become subject to a requirement to collect or post margin subject to the following
implementation timeline:
The margin provisions and RMS are subject to an initial six-month transition period (i.e. 1 March to 31 August
2017). During this period, AIs are expected to start exchanging margin and applying the RMS as soon as possible
after the commencement date, and make reasonable and continuous progress in order to achieve full compliance
by 31 August 2017.
Variation margin
derivatives entered into with a covered entity.
Initialmargin and risk mitigationstandards
1 September of each year to 31 August of the following year), where both the AI and covered entity have an
average aggregate notional amount of non-centrally cleared derivatives (calculated as the average of the total
gross notional amount of month-end positions on a group-wide basis), exceeding the respective threshold:
practicable, taking into account the nature of the transaction and counterparty.
Mar 2017 to Aug 2017
HKD 24 trillionHKD 18 trillion
Sept 2017 to Aug 2018Sept 2018 to Aug 2019
HKD 12 trillion
Sept 2019 to Aug 2020
HKD 6 trillionHKD 60 billion
Yearly from Sept 2020
2Final draft ¨CHong Kong margin and other risk mitigation standards for non-centrally cleared OTC derivatives
Variation margin and ini
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