· Document Number：No. 123 [2017] of the Securities Association of China

· Area of Law： Securities

· Level of Authority： Industry Regulations

· Date issued：05-22-2017

· Effective Date：05-22-2017

· Status： Effective

· Issuing Authority： Securities Association of China

Notice of the Securities Association of China on Strengthening the Self-disciplinary Management of the Over-the-Counter Derivatives Business
(No. 123 [2017] of the Securities Association of China)
All securities companies, fund management companies and their subsidiaries participating in the OTC derivatives transactions:
For the purposes of implementing the relevant requirements of the Notice of the China Securities Regulatory Commission on Further Regulating Securities and Futures Business Institutions' Participation in the OTC Derivatives Transactions (No. 81 [2016], CSRC), strengthening the self-disciplinary management of the OTC derivatives business, and effectively preventing and controlling risks, you are hereby notified of the following matters:
. I. Improving the recordation and data submission of the OTC derivatives business
1. Submission entities
All securities companies, fund management companies and their subsidiaries (hereinafter referred to as the “securities and funds business institutions”) that conduct OTC derivatives transactions shall, under the requirements of the Measures for the Recordation Administration of the Over-the-Counter Securities Business (No. 164 [2015] of the Securities Association of China), undergo the recordation formalities with the China Securities Regulatory Commission and submit relevant data thereto. The submission entities are divided into recordation institutions and participating institutions. “Recordation institutions” means the securities and funds business institutions that may engage in OTC derivatives transactions upon the approval, recordation or recognition of the relevant supervision institutions or self-discipline organizations, and other institutions are participating institutions. At least one party of the two parties in an OTC derivatives transaction shall be a recordation institution.
2. Scope of business to be submitted
Securities and futures business institutions shall directly participate in the OTC derivatives transactions under SAC, NAFMII, ISDA and other master agreements or participate therein as product managers.
3. Submission path
The securities and funds business institutions shall submit the relevant data of the OTC derivatives business to the OTC derivatives reporting module in the OTC securities business reporting system. The login address of the OTC securities business reporting system: http://rpt.interotc.com. Securities and funds business institutions that have not registered accounts shall enter relevant information for the registration of accounts.
4. Contents to be submitted
(1) Continuous report: the recordation institutions and participating institutions shall submit the relevant transaction information within 5 working days after the master agreements, supplemental agreements or transaction confirmation letters are signed.
(2) Regular report: The recordation institutions shall, before the 10th day of each month, submit the overall information on the scale of the OTC derivatives business, etc., shall, within 15 days after the end of each quarter, submit the examination opinions of the companies' compliance departments and the explanation for the information on the compliance of the business, and shall, before April 30 of each year, submit the annual reports on the OTC securities business of the previous year. A regular report per quarter shall include the counterparties, transaction structure, ratio and use of the margin, product relevance and other compliance contents of the OTC derivatives transactions. An annual report shall include the business model, business scale, counterparties, hooked subject matters, hedging position, performance guarantee, profits and losses, risk management and control, compliance management and other general information on the OTC derivatives transaction.
(3) Report on significant events: In the event of default, early termination, major business risk, significant business loss, impact on the continuous operation of business, and other circumstances during the duration of a contract on the OTC derivatives transaction, the recordation institution shall, within three working days after the occurrence of the event, submit a report on the significant event, to explain the cause, handling measures and impact consequences of the major event.
All securities and funds business institutions shall, within three months of the date when this Notice is issued, submit the information on the historical OTC derivatives transactions.
II. Strengthening the compliance management and risk control of OTC derivatives business
1. The securities and funds business institutions shall guarantee the authenticity, accuracy and completeness of the data submitted and be responsible therefor.
2. All securities and funds business institutions shall participate in the OTC derivatives transactions according to the law and regulations, and the recordation institutions shall fully understand the conterparties' true purposes for participating in the OTC derivatives transactions and shall not have the following behaviors:
(1) They shall not provide financing or disguised financing services for any transaction counterparty.
(2) They shall not collect margin that significantly exceeds the performance guarantee needs.
(3) They shall not use margin according to the instructions of counterparties.
(4) They shall not provide services or facilities for the avoidance of the supervision behaviors for non-standard assets.
(5) Other behaviors prohibited by the China Securities Regulatory Commission.
3. The recordation institution shall establish and improve the compliance management, internal control and risk management mechanism of the OTC derivatives transactions. The master agreement, the supplementary agreement, the performance guarantee agreement, the transaction confirmation letter, and other relevant contracts and important documents shall be subject to compliance review of the enterprises and shall be kept for future reference.
III. Strengthening the measures for the self-disciplinary management of the OTC derivatives business
1. Where the securities and funds business institutions participating in the OTC derivatives transactions fail to submit the date as required or are suspected of violating the self-disciplinary rules, the China Securities Regulatory Commission shall, in light of the seriousness of the case, interview the business directors or primary persons in charge, and request them to make rectification within the prescribed time limit. After making rectification as scheduled, the securities and funds business institutions shall submit the rectification reports to the China Securities Regulatory Commission.
2. Where the securities and funds business institutions participating in the OTC derivatives transactions are suspected of violating the self-disciplinary rules, the China Securities Regulatory Commission shall, in light of the seriousness of the case and in accordance with the Measures of the Securities Association of China for the Implementation of the Self-disciplinary Management Measures and Disciplinary Sanctions, take relevant self-disciplinary punishment measures.
3. Where the securities and funds business institutions participating in the OTC derivatives transactions are suspected of violating the laws and regulations and regulatory provisions or have major risk hazards, the China Securities Regulatory Commission shall transfer the cases to the local CSRC offices in the place where the securities and funds business institutions are located for investigation and handling according to the law.
4. The China Securities Regulatory Commission shall, in accordance with the Measures for the Recordation Administration of the Over-the-Counter Securities Business (No. 164 [2015] of the Securities Association of China), establish a blacklist system for the OTC derivatives business, and include the securities and funds business institutions and their relevant personnel committing serious violations in the blacklist. The blacklist shall be announced at the website of the Association and be included in the integrity system. During the period when relevant institutions are blacklisted, relevant institutions shall not carry out new OTC derivatives business.
IV. Other OTC securities business
The securities and funds business institutions participating in other OTC securities business shall, mutatis mutandis to the requirements of this Notice and under the relevant provisions on the recordation of the OTC securities business, effectively conduct recordation and data submission, and strengthen the compliance management and risk control of the OTC securities business.
V. Contact persons
1. Contact persons for issues concerning recordation
OTC derivatives business: Jin Yinhua, Tel: 010-66575997, Email: jinyh@sac.net.cn
2. Contact person for issues concerning data submission
(1) OTC derivatives business: Liang Jingmei, Tel: 010-83897845, Email: liangjm@sac.net.cn
(2) Non-public offering of corporate bonds: Zhao Wenwen, Tel: 010-83897932, Email: zhaoww@sac.net.cn
(3) Income credential: Li Yaqi, Tel: 010-83897925, Email: liyq@sac.net.cn
(4) OTC securities sales business and registration, custody and settlement of securities companies: Zhao Zhisong, Tel: 010-83897840, Email: zhaozs@sac.net.cn
3. Contact persons for issues concerning technology
He Jingsi, Tel: 010-83897917, Email: hejs@sac.net.cn
Annexes: 1. Template of the Contents and Format of the Report on OTC Derivatives
2. Template of the Contents and Format for the Recordation of Non-public Offering of Corporate Bonds
3. Template of the Contents and Format of the Report on Income Credential
4. Template of the Contents and Format of the Report on OTC Securities Sales Business
5. Template of the Contents and Format of the Report on Registration, Custody and Settlement of the Securities Companies
Securities Association of China
May 22, 2017