HONG KONG, Dec 10 (Reuters) - Hong Kong plans to set up a regulation system for over-the-counter derivatives, authorities said on Friday, as part of a global push to increase transparency in the market following the financial crisis.
The move is part of Hong Kong's efforts to meet commitments made by the Group of 20 leading developed and emerging market countries to centrally clear and report off-exchange traded derivatives to repositories by the end of 2012.
Hong Kong's Securities and Futures Commission (SFC) said in a statement it will work with the government, the Hong Kong Monetary Authority and Hong Kong Exchanges and Clearing Ltd on the regulations.
The SFC said interest rate swaps and non-deliverable forwards will be the first products required to be reported to the trade repository and centrally cleared.
The SFC plans to consult the market on the regulatory regime by the third quarter of next year to pave the way for the roll-out of the trade repository and a central counterparty by the end of 2012, it said.
Clearing houses in Europe and the United States have already begun to clear credit default swaps amid a global regulatory push to inject more transparency into a sector found at the heart of the financial crisis.
The aim is to prevent a repeat of the crisis in the derivatives market following the collapse of Lehman Brothers and near-collapse of AIG when many trades linked to those institutions couldn't be settled.
Hong Kong has the largest OTC derivatives market in Asia although the market is still relatively small compared to Europe and the United States. Singapore Exchange launched Asia's first clearing service for over-the-counter derivatives last month. [ID:nSGE6AE0UB] (Reporting by Lee Chyen Yee and Rachel Armstrong; Editing by Muralikumar Anantharaman)