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TFSDHK

Client Announcement

T.F.S. Derivatives HK Ltd "the Company" as an exchange participant of HKFE/SEHK informs all clients of the following intraday position limits for trades conducted through Company as follows:

6,000 Futures Lots; and
6,000 Options Lots

Note: the positions of all accounts under the direct or indirect common control or management of a person, and the positions of all accounts of a person or persons acting pursuant to an express or implied agreement or understanding, shall be subject to aggregation by the Exchange.

Reporting requirements and the responsibilities of reporting set out in these Rules, Regulations and Procedures and in the Securities and Futures (Contracts Limits and Reportable Positions) Rules and related guidance notes issued by the Commission. Exchange Participants and Their Clients Document Link.

Disclaimer to Customers for Prescribed Position Limits, Responsibility of Reporting and Delegation Arrangement on Large Open Positions (“LOP”)

T.F.S. Derivatives HK Limited ("TFSD HK") as an exchange participant of HKFE/SEHK informs all clients of the following prescribed position limits, requirements and the responsibilities of reporting Large Open Position as prescribed by (i) the Rules 628 and 633 of the Hong Kong Futures Exchange Limited (“the HKFE Rules”); (ii) the Securities and Futures (Contracts Limits and Reportable Positions) Rules (“Cap. 571Y”); and (iii) the Guidance Note on Position Limits and Large Open Position Reporting Requirements (“Guidance Note”) issued by the Securities and Futures Commission (”SFC”).

Purpose of the Rule

The purpose of the Rule is to avert potentially destabilizing market conditions arising from an over-concentration of futures/options positions accumulated by a single person or group of persons acting in concert and to increase market transparency. Anyhow, you ought to review the Rules and Guidance Note in entirety and consult with your legal counsel in order to ensure that you have a full understanding of your obligations in connection with trading in Hong Kong.

Reporting Requirements and Responsibilities of Large Open Positions
Prescribed Position Limits

According to the Rules (Cap. 571Y), no person may hold or control futures contracts or stock options contracts in excess of the Prescribed Limit, unless prior authorization is obtained.

Reportable Positions

If you hold or control an open position in futures contracts or stock options contracts in excess of the Reporting Level specified in the Rules (Cap. 571Y) and Large Open Positions and Position Limits from HKEX, you are required to report that position in writing to the relevant Hong Kong exchange.

For reportable positions arising from trading in the after-hour trading session, you should combine the positions with trades transacted in the regular trading session on the following business day and report your LOP accordingly.

If you are holding or controlling positions directly or indirectly at any Exchange Participants, you should have the obligation to aggregate positions for purposes of applying the prescribed limits and reportable position requirements.

However, the Rules apply separately to the positions held by each of the underlying clients of an omnibus account, except where the omnibus account operator has discretion over the positions in which case the account operator must also aggregate these positions with his own positions. Positions held by different underlying clients should not be netted off for purposes of calculating and reporting reportable positions or determining compliance with the prescribed limits. (Para. 6.8 of the Guidance Note)

The SFC takes the view that a person is regarded as having control of positions if, for example, the person is allowed to exercise discretion to trade or dispose of the positions independently without the day-to-day direction of the owner of the positions. (Section 7 of the Rules (Cap. 571Y) and Para. 2.6 of the Guidance Note)

Refer to the below links for the prescribed limit and reporting level on the number of contracts for both futures contracts and stock options contracts respectively.

Delegation of Our LOP Reporting Responsibilities

TFSD HK is now delegating the LOP reporting duties to the General Clearing Participant, Merrill Lynch Far East Limited (“Merrill Lynch”). Merrill Lynch will now be responsible to report any LOP on behalf of TFSD HK. In light of the above, Merrill Lynch will, as determined by Merrill Lynch’s discretion, seek to report any or all positions for TFSD HK. In this circumstance, our client’s LOP will be under the name of TFSD HK and will be reported by Merrill Lynch.

Positions in other Exchange participant(s)

If your reportable positions are held with other Exchange participant(s) as well and notwithstanding that positions separately held by each Exchange participant may not have exceeded the reporting level, you are still obligated to fulfill the reporting requirement, either to submit the notice of the reportable positions to the Exchange directly with the use of LOP report template or through an Exchange Participant or its agent where the latter agrees to make the reporting on your behalf such that the total number of positions reported shall represent the total number of positions held in other Exchange participant(s) in excess of the reporting level.

In case you choose to submit the notice of reportable positions to the Exchange through one of the Exchange Participants and where that Exchange Participant agrees to submit the notice on your behalf, you should provide to them your total positions held or controlled (including those at other Exchange Participants).

Ways and Requirements of Reporting Open Positions

Any Exchange Participants holding positions in excess of the Reporting Level for its own account or for any client shall:

  • file a LOP Report with the HKFE/SEHK via ECP no later than 12:00 noon of the next business day after the positions are opened or accumulated; and
  • continue to file a report on a daily basis for as long as you hold positions in excess of the reporting level.
  • The Hong Kong exchanges may request provision of additional information in the LOP report other than that specified under the Rules such as (i) the account number, account name and identity of the transaction originator of a reportable position, (ii) the nature of a reportable position, and (iii) account type.

    Any Exchange Participants with open position held for its own account or each of its client(s) exceeding 60% of the position limit of stock index futures and options products with the same underlying index, is required to:

  • report all outstanding positions in the products concerned to HKFE, including those positions that are below the LOP Reporting Level.
  • Penalties

    In excess of prescribed limit or failing to lodge a notice for reportable positions would commit an offence and is liable—

    1. on conviction on indictment to a fine at level 6 and to imprisonment for 2 years; or
    2. on summary conviction to a fine at level 3 and to imprisonment for 6 months.

    Reference Links
    Securities and Futures (Contracts Limits and Reportable Positions) Rules

    https://www.elegislation.gov.hk/hk/cap571Y

    Guidance Note on Position Limits and Large Open Position Reporting Requirements

    https://www.sfc.hk/web/EN/rules-and-standards/codes-and-guidelines/guidelines

    Rules, Regulations and Procedures of the Futures Exchange