Hong Kong’s two financial regulators have launched a joint consultation proposing to permanently standardise the calculation periods used to determine mandatory clearing obligations for over-the-counter derivatives.
The Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) announced on 29 January that they intend to replace the current system, which requires regular legislative amendments to extend a finite list of dates, with a formulaic approach that would apply indefinitely.
“In a move to further increase the efficiency of the operation of the Clearing Rules, the HKMA and the SFC propose to designate, once and for all, standard calculation periods for each year with effect from 1 March 2027,” the regulators stated.
How the system works
Calculation periods are three-month windows used to assess whether a firm’s OTC derivative positions exceed the US$20 billion threshold that triggers mandatory central clearing. Under the current framework, Schedule 2 of the Clearing Rules contains a specific list of dates that must be periodically extended through legislative amendments subject to negative vetting by the Legislative Council.
The last such update occurred in April 2022, when regulators added eight new calculation periods covering the market through late 2026. The proposed standardised approach would eliminate the need for these recurring amendments.
Under the new system, two fixed windows would apply each year:
- First period: 1 March to 31 May
- Second period: 1 September to 30 November
This structure follows the pattern used since the clearing mandate began in 2016, keeping a six-month gap between periods that regulators view as sufficient to capture market activity.
Benefits for market participants
The regulators said the change would “offer greater certainty to derivative dealers in identifying future calculation periods to ensure compliance.”
For compliance teams at financial institutions, a permanent schedule allows for better long-term planning. Firms can configure monitoring systems to automatically trigger threshold checks at predictable intervals rather than waiting for legislative confirmation of future dates.
The proposal would reduce the need for the regulators and the Legislative Council to process amendments every few years to extend the list of calculation periods.
Interested parties have until 27 February 2026 to submit comments. Following the consultation, final conclusions will be published and amendments submitted to the Legislative Council. The standardised approach is scheduled to take effect on 1 March 2027, so that it applies from the time the periods added in 2022 expire.
The consultation paper is available on both the HKMA and SFC websites.
