Due diligence work stemming from electronic trading regulations set to commence in January is leading to a heavy workload for Hong Kong’s buy- and sell-side. Whilst there have been a few complaints from the industry, there has also been praise, according to Ashley Alder, the CEO of Hong Kong’s Securities and Futures Commission (SFC).
“We have talked to people, particularly on the compliance side of firms, who really welcome this,” he said. “Unless they have a document in their hands – ideally one from a regulator – they find that they may not have enough leverage within a firm to advocate higher standards. I frankly don’t think there is anything in the rules of the new regulatory regime on electronic trading that is radical or poses extraordinary burdens”
He surmised that most people in the industry have understood that there does need to be a greater degree of formality and structure around checking out systems and the question of DMA.
Nevertheless, the buy-side and sell-side have spent a lot of hours on this project. He welcomed the industrious nature that many in the industry have shown in recent months.
“You don’t put something in place that causes someone to do nothing. Developed jurisdictions do need to put in place basic safety features which involve obligations on those providing and using electronic trading methods, particularly algorithmic trading and direct market access.”
He added that there was plenty of lead time for intermediaries to do all of the necessary work in Hong Kong given that there were nine months between the release of the consultation conclusions in late March this year and the commencement of the new regime in January next year.
“Many intermediaries, both on the buy and sell-side, have been doing it to date, possibly in an uncoordinated way and I think it is really good that people are focusing their minds on this,” he said. “You always go through these humps when a new piece of regulation comes out. There is bound to be a period where people scramble and feel that it is a too much of a burden. I haven’t spoken to anyone who doesn’t see what the objective of the new regulatory regime on electronic trading is. It is pretty straightforward.”