Global rules that were designed to increase transparency in the swaps market worry the Hong Kong Monetary Authority. According to a recent report from the Wall Street Journal, the rules could impact liquidity in Asia unless regulators agree on measures to make the rules workable for their markets.
Howard Lee, executive director of monetary management at the Hong Kong Monetary Authority, urged global regulators to phase in the new rules gradually to mitigate any adverse impact on the swaps markets. The rules, which took effect earlier this month in the United States, push most derivatives trades through central clearing houses and trade repositories. The new rules are now being rolled out in Europe and Asia as well.
“Any extra territorial impact of the new regulations of these jurisdictions may therefore bring significant impact on entities working in this part of the world,” Lee said. “Failing to address these challenges may make it impossible to conduct these transactions in this region, resulting in the withdrawal of liquidity and market fragmentation, which wouldn’t be conducive to strengthening financial stability,” he added.
Hong Kong regulators are now working with their global counterparts to minimize the impact of the new rules, but no measures have been agreed upon. Recently, the Wall Street Journal noted, the leader of the Hong Kong Securities & Futures Commission also warned of possible side effects on Asia from the global push for the rules. Also, the central bank governor of Australia said “policy makers need to be wary of an already bulging global agenda for new rules,” the paper reported.
Read more about this story online from the Wall Street Journal.