Hong Kong Exchanges and Clearing Limited (HKEX), together with PBOC, the SFC, and HKMA, has announced the upcoming launch of Swap Connect, the new mutual access programme between Hong Kong and Mainland China’s interbank interest rate swap markets.
Swap Connect will go live on 15 May 2023 in order to give Hong Kong and international investors access to Mainland China’s interbank financial derivatives market through a connection between financial infrastructure institutions in the Hong Kong and Mainland China markets.
HKEX, through its clearing subsidiary OTC Clear, has been working with China Foreign Exchange Trade System (CFETS) and Shanghai Clearing House (SHCH) to develop the underlying infrastructure for Swap Connect and will facilitate the delivery and operation of the programme.
“Swap Connect is the latest chapter in our Connect story”
Nicolas Aguzin, Chief Executive Officer at HKEX, said: “Swap Connect is the latest chapter in our Connect story. As the world’s first derivatives mutual market access programme, it will help forge stronger connectivity between Hong Kong and Mainland’s capital markets, further supporting their mutual development and strengthening Hong Kong’s role as an international financial centre. We look forward to working with our Mainland partners and all our regional and international market participants to ensuring the successful rollout of Swap Connect, as we connect China and the world.”
Under Swap Connect, CFETS and overseas electronic trading platforms recognised by the PBOC will jointly provide trading services for Hong Kong and international investors. The programme will give access to interest rate swaps at the initial stage, which will be priced, settled and cleared in Renminbi.
OTC Clear and SHCH will jointly provide clearing and settlement services through a central counterparties link, with OTC Clear providing central clearing services for Hong Kong and international investors, while SHCH will provide central clearing services for investors in Mainland China.
OTC Clear is an SFC-recognised clearing house and an internationally-recognised qualifying central counterparty that provides clearing and settlement services for OTC derivative transactions.
Stock Connect programme expands
The announcement follows a recent statement by the China Securities Regulatory Commission and Hong Kong’s Securities and Futures Commission (SFC) about an in principle further expansion of the scope of underlying stocks eligible for trading under Chinese mainland-Hong Kong Stock Connect mechanisms.
The pragmatic cooperation between Chinese mainland and Hong Kong capital markets and the expansion of the programme will gain further visibility in international markets with the global expansion of HKEX, which is opening offices in New York and London.
The New York office, for example, will provide an on-the-ground dedicated team for HKEX’s North American customers and will promote the exchange operator’s liquid primary and secondary cash markets, as well as its exclusive connectivity with Mainland China’s markets and its diverse suite of derivatives.
A few highlights of the HKEX role in financial markets:
- International investors account for around 41% of Hong Kong’s cash equities market trading turnover, with US investors accounting for 10% of total turnover.
- HKEX has a unique cash and derivatives product ecosystem with underlying in Greater China, Asia Pacific, and beyond, including a vast suite of futures and options products that track Hang Seng and MSCI indexes.
- Over 70% of all international investments into China’s A-share equities market are held via HKEX’s Stock Connect programme, which provides international investors with exclusive and reliable access to the A-share market.
- HKEX’s Connect infrastructure continues to develop: international companies that primary list in Hong Kong will soon have direct access to Mainland China investors, providing another compelling reason for a Hong Kong listing.
