Swap Connect goes live and bolsters Hong Kong as a risk management hub

Rick Steves

“This is the world’s first-ever mutual market access derivatives programme and will offer regional and international investors new risk management tools and investment opportunities in Mainland China’s bond market.”

Swap Connect, the latest mutual access programme between Hong Kong and Mainland China, has gone live today, May 15, starting with Northbound Trading which allows investors from Hong Kong and other jurisdictions to participate in the Mainland interbank interest rate swap market.

Mainland China bond holdings by international investors amounted to RMB3.2 trillion, up by about 300% from that of 2017 when the Bond Connect scheme was first launched.

“World’s first-ever mutual market access derivatives programme”

Julia Leung, Chief Executive Officer at SFC, said: “Swap Connect marks the first mutual market access programme for financial derivatives products that allows global investors holding Mainland bonds to manage renminbi interest rate risks. It deepens connectivity between Mainland and overseas capital markets and bolsters Hong Kong’s position as a risk management hub.”

Nicolas Aguzin, Chief Executive Officer at HKEX, commented: “The launch of Swap Connect today is a major development in our market. This is the world’s first-ever mutual market access derivatives programme and will offer regional and international investors new risk management tools and investment opportunities in Mainland China’s bond market. As Hong Kong’s global role grows as a derivatives hub, and its position as a superconnector between East and West continues to strengthen, I am excited about the opportunities Swap Connect will bring to Mainland China and Hong Kong and to the future of the region’s capital markets. This is another example of great collaboration and I congratulate all involved.”

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.

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.

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