regulation

SFC’s enhanced position limit regime to take effect

ID 26376

The Securities and Futures Commission (SFC) has published a press release to inform that the new position limits regime as outlined in the above noted consultation conclusions will come into force on December 22, 2023. The final changes to the Securities and Futures (Contracts Limits and Reportable Positions) Rules have been made and will come into force on that day.
Among other things, the new regime
– revises the position limits for stock options and futures contracts by expanding the current three-tier model based on liquidity and market capitalization of the underlying to a five-tier model;
– removes mini stock index futures and options contracts from the position limit requirement;
– increases the position limits for Renminbi currency contracts;
– exempts all derivatives in relation to three indices, the Hang Seng Index (HSI), the Hang Seng China Enterprises Index (HSCEI), and the Hang Seng TECH Index from the position limit requirement; and
– makes some changes as regards the expansion of the position limits to sub-fund to
– clarify that ALL funds regardless of the legal form will be subject to the new requirement;
– require all fund managers to observe position limits and report on positions at individual fund level; and
– provide that trustees are in compliance with the new requirements so long as they have adequate policies and procedures in place to ensure that the fund manager is compliant with the position limits and reporting requirements.
To help fund managers comply with the new requirements, the SFC has issued one new frequently asked question (FAQ) in this context which reads as follows:
Question 7: How do the Securities and Futures (Contracts Limits and Reportable Positions) Rules apply to different fund management entities (eg, management companies, sub-investment managers or co-investment managers of the fund, etc)?
Answer: Fund management companies are subject to the prescribed limits and reporting obligations as long as they hold or control any futures or options contracts as prescribed in the Rules, whether for their own or in respect of the funds. Nevertheless, provided that these management companies do not have discretion in relation to the positions (eg, the day-to-day investment management of the funds has been delegated to investment managers or sub-managers), they are not required to aggregate the funds’ positions, or the funds’ positions with their own positions, if any, in order to comply with the Rules. In this case, the prescribed limits and reporting obligations shall apply separately to the fund management companies’ own positions and each of the funds they hold.
On the other hand, investment managers including sub- or co-investment managers who carry out the investment management functions in respect of the funds are generally required to aggregate the positions for the purpose of compliance. However, if they do not hold or control any positions in the futures or options contracts as prescribed in the Rules, they will not be subject to the relevant prescribed limits and reporting requirements.

Other Features
auditing
capital management companies
clearing
companies
compliance
Derivatives
FoFs
fund management
limit
liquidity
model
notifications
permissions
position limits
regulatory
reporting
securities
trading
Date Published: 2023-12-19
Date Taking Effect: 2023-12-22
Regulatory Framework: Securities and Futures Ordinance
Regulatory Type: regulation

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