Posted inRegulation

Hong Kong and China kick start Swap Connect programme

The launch comes 10 months after the initial announcement.
Hong Kong and China Flag

Hong Kong-based investors will be allowed to participate in the mainland Chinese interbank financial derivatives market, according to an announcement by the People’s Bank of China, the Securities and Futures Commission of Hong Kong and the Hong Kong Monetary Authority.

The programme will begin with northbound trading on 15 May, in which Hong Kong-based institutional investors who have completed filings for participating in the Bond Connect scheme, a fixed-income trading link between Hong Kong and mainland China, will be allowed to purchase interest rate swap contracts settled in renminbi.

Meanwhile, the Hong Kong stock exchange will work with China Foreign Exchange Trade System and Shanghai Clearing House to develop the underlying infrastructure for the Swap Connect programme.

“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,” said Nicolas Aguzin, CEO of Hong Kong Exchanges and Clearing, the operator of the Hong Kong stock exchange.

The daily net notional principal amount of interest rate swap contracts traded by all overseas investors under the scheme should not exceed Rmb20bn ($2.89bn) and the quota may be adjusted when appropriate, according to the authorities.

In July, the authorities said southbound trading, which allows mainland investors to access the Hong Kong financial derivatives market, “will be explored in due course”.

The initiative was first announced in July last year.

Part of the Mark Allen Group.