Global Regulatory Brief: Trading and markets, June edition

The Global Regulatory Brief provides monthly insights on the latest risk and regulatory developments. This brief was written by Bloomberg’s Regulatory Affairs Specialists.

Trading and markets regulatory developments

The launch of the Swap Connect scheme between the Chinese mainland and Hong Kong marks a new phase of global investor participation in Chinese bond and financial derivatives markets. Meanwhile, the UK is looking to improve the attractiveness of its public equity markets and Saudi Arabia is making it easier for foreign investors to participate in their capital markets. Singapore has issued near-final rules for derivatives reporting and the US is modernizing share repurchase disclosure requirements.

Navigate the regulatory challenges that are reshaping financial markets with confidence.

• China provides global investors access to its onshore interest-rate swap market
• UK FCA consults on reforms to equity listing rules
• SEC adopts amendments to modernize share repurchase disclosure
• Singapore issues near-final derivatives reporting rule revisions
• FCA to introduce designated reporting regime
• Saudi CMA eases entry for foreign investment in securities
• US SEC adopts amendments to enhance private fund reporting

China provides global investors access to its onshore interest-rate swap market

The Hong Kong Monetary Authority (HKMA) has announced the launch of the initial stage of Swap Connect. This project aims to provide the capability and infrastructure for investors to trade interest rate swap products in mainland China and enable investors to manage interest rates risks through participation in financial derivatives markets across Mainland China and Hong Kong. In the initial stage, ‘northbound trading’ will allow overseas investors to participate in mainland China’s interbank financial derivatives market through mutual access between key infrastructure institutions across trading, clearing and settlement in Hong Kong and mainland China. Interest rate swaps will be eligible first, with other products to be included in due course. Prior to the launch, the HKMA set out the capital and reporting treatments applicable to assets posted by banks for participating in Swap Connect. The Swap Connect project comes as China looks to open up further to global investors.

UK FCA consults on reforms to equity listing rules

The FCA is inviting feedback on proposed reforms to the UK framework for listing commercial companies’ equity shares. Specifically the FCA intends to replace the standard and premium listing share categories with a single category for equity shares in commercial companies (ESCC). The FCA propose that this new single category would involve a series of changes such as the removal of certain eligibility rules requiring historical financial information, simplified operational control rules, a more permissive approach to dual class share structures, and the removal of compulsory shareholder votes for significant transactions. Comments are due by June 28 and the FCA intends to consult further on wider changes and draft rules in autumn 2023.

The proposals come as the UK looks to attract a more diverse range of issuers to UK public markets, provide investors with a wider range of companies to consider and address the long-term decline in the number of companies listing in the UK.

SEC adopts amendments to modernize share repurchase disclosure

The US Securities and Exchange Commission (SEC) adopted amendments to modernize the disclosure requirements relating to repurchases of an issuer’s equity securities, including requiring issuers to provide daily repurchase activity on a quarterly or semi-annual basis, depending on the type of issuer. The amendments will improve disclosure and provide investors with enhanced information to assess the purposes and effects of share repurchases. Foreign private issuers that file on foreign private issuer forms will disclose the quantitative data in new Form F-SR beginning with the Form F-SR that covers the first full fiscal quarter that begins on or after April 1, 2024, and provide the narrative disclosure starting in the first Form 20-F filed after their first Form F-SR has been filed. Registered closed-end management investment companies that are exchange traded will disclose the quantitative data and provide the narrative disclosure on Form N-CSR beginning with the Form N-CSR that covers the first six-month period that begins on or after January 1, 2024. All other issuers will be required to include the quantitative data as an exhibit to their Forms 10-Q and 10-K and provide the narrative disclosure in their Forms 10-Q and 10-K beginning with the first filing that covers the first full fiscal quarter that begins on or after October 1, 2023.

Singapore issues near-final derivatives reporting rule revisions

The Monetary Authority of Singapore (MAS) has issued “close-to-final” amendments to its OTC derivatives reporting regime that seek to facilitate the aggregation of OTC derivative data through standardization and harmonization. The proposals aim to incorporate Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions (CPMI-IOSCO) technical guidance on the harmonization of the unique transaction identifier (UTI), unique product identifier (UPI) and other critical data elements (CDE). To align with similar initiatives to implement the UTI, UPI and CDE technical guidance in other major jurisdictions such as the US and Europe, MAS will implement the requirements from October 2024, approximately six months after the commencement of the EU’s European Market Infrastructure Regulation (EMIR) Refit rules. The publication outlines the feedback received during the consultation process and its response to said feedback.

FCA to introduce designated reporting regime

The FCA has published a policy statement on equity secondary markets as part of the UK wholesale markets review. This includes the introduction of a designated reporting regime which will remove the systematic internalizer (SI) status as a criterion for establishing when an investment firm is required to fulfill transparency reporting to the market. Under the new regime, firms can elect to register themselves as a designated reporter (DR) regardless of their SI status. Registration will apply at the entity level, meaning that DR status would apply to all reportable trades across all financial instruments. In the case where neither counterparty is a DR then the seller will report. The DR regime will go live in April 2024, representing a 12-month implementation period to provide firms with sufficient time to make the necessary changes.  

The policy statement also confirms that a task force will be established to develop guidance and good practice for trading venue outages. Other notable policy announcements include changes to the content of post-trade transparency, the use of reference prices from overseas venues for UK trading venues, and removal of the size thresholds for orders benefiting from the order management facility (OMF) waiver. These amendments to post-trade transparency requirements will come into force in April 2024 alongside the designated reporting regime, and all other changes apply immediately.

Saudi CMA eases entry for foreign investment in securities

The Capital Market Authority (CMA) of Saudi Arabia has approved rules for foreign investment in securities with the objective of facilitating qualified foreign investor (QFI) participation in the Saudi capital markets. This is intended to boost market liquidity and enhance the role of institutional investors. Further, the rule-changes aim to reduce differences between QFIs and other investor categories in order to ease entry into the Saudi capital markets. The amendments also include the addition of a new channel for foreign investment in securities listed on the main market by enabling foreign investors to invest through discretionary portfolio management by Capital Market Institutions. The rule changes come as Saudi Arabia aims to attract investment through its Vision 2030 project that seeks to position the Kingdom as a leading financial market.

US SEC adopts amendments to enhance private fund reporting

The US Securities and Exchange Commission (SEC) adopted amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds. The amendments are designed to enhance the ability of the Financial Stability Oversight Council (FSOC) to assess systemic risk and to bolster the Commission’s oversight of private fund advisers and its investor protection efforts. The amendments will require large hedge fund advisers and all private equity fund advisers to file current reports upon the occurrence of certain reporting events that could indicate significant stress at a fund or investor harm. The amendments will also require large private equity fund advisers to report information on general partner and limited partner clawbacks on an annual basis as well as additional information on their strategies and borrowings as a part of their annual filing. The amendments for current reporting will become effective six months after publication of the adopting release in the Federal Register, and the remaining amendments will become effective one year after publication in the Federal Register.

View the additional regulatory briefs from this month:

• Risk, capital and financial stability
• Green finance
• Digital finance

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