Tuesday April 21 2015

News Source: Global Exchanges

Focus: Stock Exchange Regulation

Type: General




Securities and Futures Commission (SFC) has announced in view of the recent increase in market turnover and volatility, all securities and futures brokers (“Brokers”) must closely monitor their financial and operational capabilities and maintain sufficient resources to cope with any increase in business. Brokers are further reminded to prudently manage their market, credit and operational risks as a result of increased business activities.

General Principle 3 of the Code of Conduct1 requires licensed persons to have and employ effectively the resources and procedures which are needed for the proper performance of their business activities. Brokers are reminded to:

  • closely monitor the changes in their variable required liquid capital due to the increase in their business, and maintain sufficient liquid capital to ensure compliance with the Securities and Futures (Financial Resources) Rules at all times;
  • ensure that they have adequate liquidity for operating their business, meeting their obligations to clients, the clearing houses and other counterparties; and
  • vigilantly manage their financial risks and prudently review the credit limits, trading limits and position limits granted to clients to ensure that the limits are commensurate with individual client’s financial status and the firm’s financial resources, and promptly collect outstanding margin calls from clients.

Furthermore, Brokers should diligently supervise their operations in order to mitigate operational risks and safeguard their clients’ interest, as under changing market conditions, any failure, mistake or omission in operation may result in significant adverse financial and operational consequences. They also should constantly monitor and review their operating capability, both human resources and system capacity, to ensure proper performance of their business activities.

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