The People’s Bank of China, the Hong Kong Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority have agreed to develop mutual access between the Hong Kong and mainland China interest rate swap markets, according to a joint statement.
“Building on the success of Stock Connect, mutual market access between the mainland and Hong Kong has gradually expanded to other channels,” said Ashley Alder, the SFC’s chief executive officer.
“The extension of market access to over-the-counter derivatives through Swap Connect will be another milestone, enabling global investors to participate more broadly in the vast mainland bond market.”
The initial stage of the agreement will allow investors in Hong Kong and overseas to execute interest-rate derivatives with onshore traders.
This will facilitate overseas investors to trade in the mainland interbank financial derivatives market and hedge their risks, said the authorities in the announcement.
The new facility aims to create synergy with Bond Connect. The northbound leg was first launched in 2017, while mainland investors have only been allowed to trade offshore debt through Hong Kong since September last year.
Southbound trading, which allows mainland investors to access the Hong Kong financial derivatives market, will be explored in due course, said the statement.
The announcement was made days after Chinese president Xi Jinping’s visit to Hong Kong and the new local government’s inauguration.
Swap Connect is now subject to regulatory approvals, market readiness and the completion of operational arrangements. Implementation details will be announced in due course.