AsianInvestor’s regulatory roundup: Dec-Jan

Hong Kong: New e-trading in force
New rules regulating the use of algorithmic trading in Hong Kong came into force on January 1. These require asset managers and other regulated entities engaging in electronic trading to document and test the reliability and security of their systems, whether coded internally or developed by third parties. Brokers have expressed concern that responsibility for use and monitoring of third-party algos lies with them, with some suggesting third-party providers may be unwilling to disclose proprietary coding to intermediaries as it may be deemed too commercially sensitive. However, the Securities and Futures Commission (SFC) rejected this, concluding after a consultation process in March last year that fund houses are not expected to have the same level of knowledge of algo-trading as third parties. To facilitate cooperation between fund houses and third-party developers to meet the new requirements, five Hong Kong-based financial associations, including the Alternative Investment Management Association, Asia Securities Industry & Financial Markets Association and the Hong Kong Investment Funds Association, collaborated last October in creating an electronic trading information template, to help fund managers conduct due diligence on their third-party algo providers.