HONG KONG: SFC Concludes Consultation on Position Limit Regime

Tuesday March 21 2017

On 21^st March 2017, the Securities and Futures Commission (SFC) published conclusions to a consultation to expand the scope of the position limit regime.

After considering market feedback, the SFC has concluded that the proposals as set out in the consultation will be implemented. These include a 300% cap on the excess position limit that may be authorized by the SFC, a statutory position limit of 150,000 contracts for stock options as well as new excess position limits for index arbitrage activities, asset managers and market makers of exchange-traded funds.

Under the position limit regime, an exchange participant or its affiliate may seek authorization from the SFC to hold or control Hang Seng Index and Hang Seng China Enterprises Index futures and options contracts in excess of the statutory limit for the purposes of hedging risks that arise in the course of providing services to clients.

In light of market responses, the minimum “assets under management” requirement applicable to asset managers will be lowered from $100 billion to $80 billion. An asset manager must satisfy various criteria to be eligible for the proposed asset manager excess position limit, including the minimum “assets under management” requirement.

Subject to the legislative process, the SFC plans for the amended rules to come into effect on 1 June 2017.

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