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Becoming an OTC Clear Clearing members

OTC Clear Membership Criteria

(Please also refer to Part II of the OTC Clear Rates and FX Derivatives Clearing Rules and Chapter 2 of the OTC Clear Clearing Procedures)

Currently, there is only a single Clearing Member category offered by OTC Clear. A summary of the membership criteria is shown below.

General requirements applicable to all new clearing members:

  1. Satisfy the Minimum Capital Requirements (refer below for details).
  2. Have operational and system capabilities for OTC derivatives settlement and access to at least one Approved Trade Registration System.
  3. Have adequate risk management systems, policies and procedures in place.
  4. Guarantee Fund contribution of HK$50,000,000[1].

The Minimum Capital Requirements for different types of entities are listed below.

Type of entity

Country of incorporation

Minimum Capital Requirement

HKMA Authorized Institution (AI) – Licensed Bank Hong Kong

“Tier 1 Capital as defined in the Banking (Capital) Rules (Cap. 155L) should be greater than:
(a) HK$10 billion; and
(b) 5% of the average monthly aggregate Initial Margin requirements for the Clearing Member

HKMA Authorized Institution (AI) – Deposit-taking Company (DTC) or Restricted License Bank (RLB) Hong Kong

“Tier 1 Capital” as defined in the Banking (Capital) Rules (Cap. 155L) should be greater than:
(a) HK$390 million;
(b) the capital requirement applicable to the Clearing Member set forth in the Seventh Schedule to the Banking Ordinance (Law of Hong Kong Cap. 155)
(c) 5% of the average monthly aggregate Initial Margin requirements for the Clearing Member

HKMA Authorized Institution (AI) – Licensed Bank, Restricted Licensed Bank (RLB) or Deposit Taking Company (DTC) Overseas Tier 1 Capital” as defined in the Banking (Capital) Rules (Cap. 155L) should be greater than:
(a) HK$10 billion; and
(b) 5% of the average monthly aggregate Initial Margin requirements for the Clearing Member
Licensed Corporation (LC)approved by the SFC

Hong Kong or

Overseas

“Liquid Capital” as defined in the Financial Resources Rules should be greater than:(a) HK$390 million;                                                                                                                          (b) the “required liquid capital” set forth by the Financial Resources Rule
(c) 5% of the average monthly aggregate Initial Margin requirements for the Clearing Member

Neither AI nor LC Overseas These entities are defined as “remotely regulated entities”. In general, the capital requirement for remotely regulated entities should be greater than HK$ 10 billion, depending on the jurisdiction of the country of incorporation. There may be additional capital requirements imposed by OTC Clear.

  [1] This is the initial contribution and will vary depending on stress testing results on a member’s portfolio.


Updated 15 Aug 2016

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