China, Hong Kong to Launch Interest-Rate Swap Connect

By Ronnie Harui

China and Hong Kong will launch a "Swap Connect" in six months, allowing mutual access to their respective interest-rate swap markets to promote the development of financial derivatives markets.

China Foreign Exchange Trade System, Shanghai Clearing House and OTC Clearing Hong Kong Ltd. will collaborate on this new arrangement, the People's Bank of China, the Hong Kong Securities and Futures Commission and the Hong Kong Monetary Authority said Monday in a joint statement.

Under the Swap Connect, investors will be able to participate in the financial derivatives markets in China and Hong Kong via a connection between infrastructure institutions in both places, the two central banks and the Hong Kong Securities and Futures Commission said.

Northbound trading will commence first, allowing investors from Hong Kong and overseas to participate in the mainland interbank financial derivatives market. Southbound trading, which allows mainland investors to access Hong Kong's financial derivatives market, will be explored in due course, they said.

Northbound trading will follow the existing policy framework for the opening-up of the mainland interbank financial derivatives market and take into account international practices, according to the statement. This will facilitate overseas investors to trade in the mainland interbank financial derivatives market and hedge their risks. Initially, interest-rate swaps will be eligible with other products to be included in due course, depending on market conditions, the statement said.

Write to Ronnie Harui at [e-mail]

(END) Dow Jones Newswires

07-04-22 0223ET