How ASIFMA Has Advanced Asia’s Capital Markets

ASIFMA plays a key role in the development of the region’s financial markets.
Recent successes include:

China

• CBIRC issued a notice in late November clarifying the enforceability of close-out netting to their exposures on repos and OTC derivative transactions between commercial banks in China. The legal analysis regarding the bankruptcy law provided in CBIRC’s Q&A confirms it equally applies to cross-border derivatives and repos with a Chinese financial institution. This is a welcome development echoing ASIFMA’s continuous advocacy efforts. ASIFMA and the close-out netting working group which consists of ISDA and the Department of International Trade of the UK Gov’t will continue to monitor the development.
• Short swing profit rule: AAMG finally got CSRC’s agreement in January to discuss the short swing profit rule issue with us but the date of the meeting is to be determined.

Hong Kong

• SFC’s revised ESG Fund Circular: SFC issued on 29 June its revised Circular on ESG Funds which accepted AAMG’s recommendation for global compatibility and avoided a separate set of disclosure requirements by deeming UCITS funds which incorporate ESG factors as key investment focus to be compliant with the Circular’s disclosure requirements.
• SFC’s rules on fund managers’ climate-related risk disclosure: SFC issued on 20 August the final rules on the Management and Disclosure of Climate-related Risks by Fund Managers which incorporated many of the comments and suggestions AAMG submitted in January 2021, especially replacing the proposed weighted average carbon intensity metric with a simpler carbon footprint metric.
• ASIFMA had a positive meeting with the HKMA on our ‘Recommendations for Developing an Enabling Regulatory Framework to Allow Traders to Execute Trades Remotely and Review Back-up Site Arrangements’. On the topic of ‘trading from home’, the HKMA outlined they are willing to consider firms’ requests and engage bilaterally with firms on a case-by-case basis, and with regards to ‘back-up site arrangements’, the HKMA agreed with our suggestions that back-up sites could be reduced to focus on data and system recovery.
• HK Investor ID and OTC Transactions Reporting Regimes: Responded to SFC’s consultation conclusions on proposals to (1) implement an investor identification regime (“Hong Kong Investor Identification Regime”) at trading level for the securities market in Hong Kong and (2) introduce an over-the-counter securities transactions reporting regime (“OTC Securities Transaction Reporting Regime”) for shares listed on the Stock Exchange of Hong Kong (the “Consultation Conclusion”). Following a series of submission and responses to SFC, the industry has secured several favorable and positive outcomes with the SFC. A seminar was held by Simons & Simons with ASIFMA members on the Fri 28 Jan to discuss on the FAQ update and next steps. Another submission to SFC is currently being prepared and assisted by Simons & Simons.
• Hong Kong SFC Investor Identification Regime (HKIDR):  SFC issued on 21 January supplemental FAQs which clarified that asset managers with a central dealing desk in Hong Kong do not need to assign BCANs and conduct client due diligence on their offshore affiliates if they do not open or maintain securities trading accounts for such affiliates and if the trading activities it conducts for such affiliates are incidental to the asset management activities of itself or its affiliates.  The foregoing clarified an issue raised by AAMG that is to the satisfaction of our members.
• SFC’s extension of examination requirement for license approvals under the COVID situation: SFC updated on 3 March their FAQs stating that they will grant a three-month extension for all licensed individuals who are required to pass regulatory examinations within a prescribed timeframe which falls due on or before 31 May 2022.  This was in response to AAMG’s request on behalf of members whose RO applications were being stalled due to the cancellation of HKSI in-person examinations until the end of April 2022.
• Hong Kong’s Capacity Building Working Group:  AAMG became a member in January of the Capacity Building Working Group (CBWG) under the HKMA-led Green and Sustainable Finance Cross-Agency Steering Group (CASG), which is tasked to help develop a common green and sustainable finance qualification framework and support practitioners and young people to take up this area.
• Hong Kong SFC IPO Code of Conduct: SFC’s conclusions to the earlier consultation on “Conduct Requirements for Bookbuilding and Placing Activities” issued on 29 Oct reflected many of our ASIFMA ECM recommendations. The ECM committee (ECMC) submitted feedback on the conclusions to the SFC on 2 March. Also shared feedback with HKEX re potential changes to the Listing Rules. The ECMC is now coordinating with buyside members and with ICMA on areas of shared interest; will also be discussing the submitted feedback with the SFC over a call soon

India

• Implementation of LEF for derivatives in India: following ASIFMA and ISDA’s joint representation to RBI on 5 March, RBI announced that non-centrally cleared derivatives exposure to remain outside the scope of large exposures until 30 September 2021.
• Recording and publishing transcript of analyst/institutional investor meetings by listed entity: SEBI clarified that the new requirement on recording and publishing transcript of meetings between analysts/institutional investors and listed companies applies only to post earning/quarterly calls but not one-on-one meetings.
• Relaxations of regulatory requirements: Following ASIFMA submissions, SEBI throughout the year, provided the industry with regulatory flexibilities in light of the COVID-19 pandemic. Most recently, SEBI issued its Circular around relaxations in timelines for regulatory requirements until 30 June / 31 July.
• Framework of Monitoring of Foreign Holding in Depositories Receipts: Following ASIFMA requests, the 1 October 2020 SEBI Circular on the Framework of Monitoring of Foreign Holding in Depositories Receipts has been kept in abeyance, until further instructions from SEBI.
• ASIFMA successfully obtained further extensions from SEBI and the NSE/BSE exchanges due to the current situation in India on the relaxation in timelines for compliance with regulatory requirements. SEBI extended the flexibilities around call recording until 30 September 2021, and trading from alternate locations from 31 July 2021 until 31 December 2021.
• ASIFMA had submitted member’s concerns with relation to the ‘DR aggregation/Foreign Investor Holdings monthly report’ to SEBI and successfully obtained a suspension in the enforcement of the monitoring Circular, the SEBI Circular is currently in abeyance until further notice. SEBI has advised they will look at the issues flagged in our submissions and work through the issues with RBI and MOF, and consult with ASIFMA/Custodians prior to future issuances on said topic.
• Government Bond Index Inclusion: steps in the right direction. In line with ASIFMA recommendations, RBI issued 2 circulars on 4 June and 7 June regarding 1) the decision to allow banks in India having an Authorised Dealer Category-1 licence to lend to FPIs for the purpose of placing margins with CCIL in respect of settlement of transactions involving G-secs and 2) the extension of trades reporting window. These are part of the FTSE Russell criteria to be met before confirming the inclusion of India Government Bonds in their Emerging Markets Government Bond Index. The other criteria are related to trading hours, tax regime and the access through iCSDs which ASIFMA is currently working on.
• India T+1: SEBI has finally delayed the implementation timeline from existing 1 Jan 2022 to 25 Feb 2022, and the implementation will now be done in phased manner, giving our affected members more time to consult amongst themselves and to prepare. We have been advocating for this since mid-2020, and we wrote several letters to SEBI and the Ministry of Finance regarding, and coordinated with the Exchanges, RBI, and Prime Minister’s office, among few other key stakeholders. Most FPIs are likely not going to be affected until end Q3 2022. Currently, we have created a Weekly WG with reps from FPIs, Brokers, Local Custodians, and Global Custodians to coordinate and discuss together the perspectives from all sides and on how the T+1 might work. KPMG is helping us to hold the pen for this project. We submitted two more letters to the MOF and the CCPs on 17 Dec and 19 Jan respectively, requesting to move the confirmation deadline to T+1.

Singapore

• After sharing the industry’s feedback on 9 June and meeting with MAS on 30 June, MAS issued a supervisory circular on 14 July to extend their timeline for financial institutions to cease new JPY LIBOR derivatives contracts that mature after end-December 2021, from end-June 2021 to end-September 2021.

Thailand

• Bond Investor Registration (BIR) scheme: Bank of Thailand provided an exemption to ICSDs from the BIR requirement that non-resident investors must open segregated securities account onshore to trade Thai Baht bonds, for which AAMG had advocated.

Vietnam

• New CCP Model: The Vietnam WG under the Post Trade Committee has been collaborating with the IFC WBG / VBF / CCP12 to help Vietnam upgrade its market microstructure as it seeks an upgrade from Frontier to Emerging market status. We continue to engage with VSD and SSC re proposed CCP framework, cautioning global investor concerns re prefunding.  In December, SSC and VSD agreed to our request to hold a workshop with our members, which was held on 14 Dec with simultaneous bilingual translation, while our concerns were carefully listened and they further agreed to address the pending issues.

Regional

• Addressing Fragmentation: IOSCO published in January 2022 a report on the use of global supervisory colleges in securities markets, and accepted ASIFMA PPC’s recommendation regarding the use of supervisory colleges from our report on fragmentation. The Standard Setting Body recognised that supervisory colleges help enhance communication and coordination, while we also argue they should be further expanded to include private sector in the assessment of cross-border regulatory fragmentation and its effects at both the national and regional levels.
• Comparative Analysis with Deloitte on Climate Risk Management in APAC: ASIFMA and Deloitte published an analysis on the prudential requirements for climate-related risks to identify the gaps and convergences of supervisory guidelines and requirements across APAC countries. The analysis was also included in the GFMA / ISDA response to BCBS consultation on Principles for the effective management and supervision of climate-related financial risks.
• ASIFMA/IOSCO APRC Collaboration: For the second year, IOSCO APRC invited ASIFMA to partner with them in a bilateral discussion to assess key issues in the region.  This year, we addressed the APRC meeting on fragmentation, emerging risks (including related to digitalisation) and data security. We also shared with them the recent a recent letter from the COO/Cybersecurity WG on Data Handling by Regulators.
• GFMA/ASIFMA Invited to Address G20:  GFMA has been asked to present to the G20 Sustainable Finance WG, co-chaired by US and China, in recognition of the work GFMA and ASIFMA have been doing through APEC to guide economies in scaling Climate Finance to meet Paris objectives.  Indonesia has identified two key objectives it would like to meet under its G20 presidency with respect to sustainable finance, both especially relevant to Asia and emerging markets more generally:
  1. developing a framework for transition finance and improving the credibility of financial institution commitments,
  2. and scaling up sustainable finance instruments, with a focus on improving accessibility and affordability.

(As of 6 April 2022)