Numerous Hong Kong-based brokerages lack the ability to effectively share data to regulators due to a myriad of reasons, generally related to disorganization leading the regulator to set data standards to improve efficiency by leveraging analytics capabilities.
Delays in data submission, incomplete records of trading order cycles, scattered data across systems and a lack of standardization—not only between companies but sometimes even within them—were cited as major hurdles for the Securities and Futures Commission (SFC) to regulate brokerage houses. In addition, manual validation from the SFC further slows down the process.
Moving forward, the regulator will seek to compliance from larger brokers it calls «in-scope», defined as «licensed securities brokers with trading turnover which reached or exceeded the 2% mark for the calendar year 2018» on the exchange or around 26 million Hong Kong dollars ($3.4 million).
Data analytics experience
The SFC highlighted not only the improved efficiency data analytics could offer but also its experience in usage since 2015 in onsite inspections.
«This allowed us to identify systemic trading-related control deficiencies and instances of non-compliance with the «Code of Conduct» which would otherwise go undetected,» boasted the watchdog. «In some cases, this led to investigations and regulatory action.»
According to the SFC’s circular, the first batch of brokers will have to comply in 15 months or April 2021. And subsequently, all brokers in Hong Kong will be required to observe their trading volume by the end of every calendar year to verify if they qualify as «in scope» and be given 15 months there onwards to comply if they had not already.
