According to the website of the central bank, in order to promote the simultaneous development of the financial derivatives market in the Mainland and Hong Kong, the People's Bank of China, the Hong Kong Securities Regulatory Commission and the Hong Kong Monetary Authority have decided to agree that China Foreign Exchange Trading Center (National Interbank Funding Center), Interbank Market Clearing House Co., Ltd. (hereinafter referred to as mainland infrastructure institutions), Hong Kong OTC Clearing Co., Ltd. and Ltd. (hereinafter referred to as Hong Kong infrastructure institutions) will carry out interconnection and cooperation in the interest rate swap market between Hong Kong and the Mainland.
It is reported that Huitong will be promoted steadily and orderly under the overall planning and deployment of China's financial market opening to the outside world, and will be officially launched in six months.
The website of the central bank also shows that with the approval of the State Council, the People's Bank of China recently signed a standing swap agreement with the Hong Kong Monetary Authority, upgrading the currency swap arrangement established by the two parties since 2009 to a standing swap arrangement. The agreement is valid for a long time, and the swap scale has been expanded from RMB 500 billion/HK$ 590 billion to RMB 800 billion/HK$ 940 billion, in order to further deepen the financial cooperation between the Mainland and Hong Kong, better support the construction of an international financial center and promote the steady development of the offshore RMB market in Hong Kong.
The central bank, the Hong Kong Securities Regulatory Commission and the Hong Kong Monetary Authority issued a joint announcement on the "interchangeable linked" business.
In order to implement the overall strategic plan of the CPC Central Committee and the State Council on steadily promoting the opening of China's financial market to the outside world, and promote the simultaneous development of the financial derivatives markets in the Mainland and Hong Kong, on July 4, 2022, the People's Bank of China, the Hong Kong Securities and Futures Commission (hereinafter referred to as the Hong Kong Securities Regulatory Commission) and the Hong Kong Monetary Authority (hereinafter referred to as the Hong Kong Monetary Authority) issued a joint announcement to carry out the interconnection and cooperation between the interest rate swap markets in Hong Kong and the Mainland (hereinafter referred to as Huitong).
In recent years, the openness of China's inter-bank bond market has been deepening, and the demand of foreign investors for RMB interest rate risk management has been increasing. Recently, the People's Bank of China, together with the Hong Kong Securities Regulatory Commission, the Hong Kong Monetary Authority and other departments, conducted an in-depth study on the clearing mode of cross-border derivatives transactions on the basis of summing up the successful experience of opening up the bond market, and formed a "swap link" scheme to facilitate foreign investors to participate in the domestic RMB interest rate swap market through interconnection and support the construction of a high-level financial opening pattern.
"Huitong" business is connected with the financial market infrastructure of the two places, enabling domestic and foreign investors to conveniently complete RMB interest rate swap transactions and centralized settlement without changing their trading habits and effectively observing the relevant market laws and regulations of the two places, which is not only conducive to investors' management of interest rate risks, but also conducive to consolidating their position as an international financial center.
Under the overall planning and deployment of China's financial market opening to the outside world, Huitong will be promoted steadily and orderly. The People's Bank of China will work with the Hong Kong Securities Regulatory Commission, the Hong Kong Monetary Authority and other departments to formulate institutional measures, strengthen regulatory cooperation and information sharing, guide relevant infrastructure to do a good job in the rules, business and technology of the "Interchangeable Link", strengthen market communication and cultivation, and officially launch the "Interchangeable Link" six months from now.
Answer a reporter's question on the joint announcement of "exchange of needed goods"
Q: What is the background of the "interchangeable link"?
A: In recent years, China's inter-bank bond market has been continuously opened to the outside world, especially since 20 17, the launch of the North-South Bond Connect has become an important milestone in the opening up of China's financial market. In 20021the whole year, foreign investors reached RMB bond transactions 1 1.47 trillion yuan. By the end of 20021,the scale of RMB bonds held by foreign investors reached 4 trillion yuan, accounting for about 3.5% of the total market custody. With the expansion of foreign investors' debt holdings and the increase of trading activities, their demand for using derivatives to manage interest rate risk is increasing.
From the perspective of the interbank derivatives market, since it was launched in the interbank market in 2006, RMB interest rate swap, as the main product, has developed steadily and healthily for many years, the transaction scale has gradually expanded, the participants have become increasingly rich, and the risk management function has been effectively played. 202 1. 1 trillion yuan. In order to further facilitate foreign investors to participate in inter-bank interest rate swaps and other derivatives transactions, the People's Bank of China has continuously promoted the steady opening of the inter-bank interest rate derivatives market, taken advantage of the good cooperation foundation between the mainland and Hong Kong financial markets, and adopted a financial market infrastructure connection method similar to "bond link", allowing foreign investors to participate in the domestic RMB interest rate swap market through the interconnection of domestic and foreign electronic trading platforms and central counterparty clearing institutions.
Q: What are the positive aspects of introducing "interchangeable links"?
A: First of all, it helps foreign investors to manage interest rate risk. The introduction of "swap linkage" can facilitate foreign investors to use interest rate swaps to manage risks, reduce the impact of interest rate fluctuations on the value of their bonds, smooth the cross-border flow of funds, and further promote the internationalization of RMB.
Second, it is conducive to promoting the development of the domestic interest rate derivatives market. After the introduction of the "Interchangeable Link", overseas institutions have brought about an increase in differentiated demand, supplemented by the advantages of efficient electronic transactions and closely linked transaction clearing links, which will help improve market liquidity, promote the further development of the interbank interest rate derivatives market and form a virtuous circle.
Third, it is conducive to consolidating the status of an international financial center. As an important measure for China's financial derivatives market to open to the outside world, the launch of "Exchange Link" is the concrete implementation of the tenth five-year plan to strengthen the functions of Hong Kong's international asset management center and risk management center, which is conducive to enhancing Hong Kong's attractiveness as an international financial center and deepening the cooperation between the mainland and Hong Kong's financial markets.
Q: What are the innovations of convertibility under the framework of the current interbank derivatives market?
A: InterchangeConnect adheres to the current development path of the inter-bank derivatives market, fully draws lessons from the mature experience and overall framework of the bond market opening to the outside world, connects with the latest development trends of overseas derivatives markets, and takes electronic transactions and central counterparty clearing as the core, optimizes existing processes and improves transaction clearing efficiency.
Under the "Exchange Connect", domestic and foreign investors can trade through the connection of relevant electronic trading platforms without changing their trading habits. At the same time, "InterchangeLink" innovated the interconnection mode of derivatives clearing institutions, and two central counterparties provided centralized clearing services for RMB interest rate swaps for domestic and foreign investors. Domestic and foreign investors can conveniently complete RMB interest rate swap transactions and centralized clearing under the premise of complying with the market laws and regulations of the two places.
Q: What are the considerations and measures for risk prevention of "interconnection" business?
A: Effective risk prevention is the basis for the high-quality development of the financial derivatives market, and it is also the core principle we adhere to in promoting the work of the "exchange". Under the "Exchange Access", we mainly take the following measures:
First, ensure the trading order and control the overall market risk. The "swap link" adopts the trading mode of the quotation institution to play the role of the quotation institution in stabilizing the market. Referring to the Shanghai-Shenzhen-Hong Kong Stock Connect mechanism, the total amount management will be initially implemented to meet the risk management needs of investors and prevent market risks.
The second is to strengthen the risk management arrangements between the financial market infrastructures of the two places. Considering the actual situation of international financial derivatives trading, clearing and settlement, risk management, etc., we will combine electronic trading with central counterparty clearing, formulate stable and reasonable system connection arrangements, ensure that the "interchangeable connection" business strictly abides by the macro-prudential principle, take risk control measures at all levels, focus on preventing cross-market risk spillover, and weave a solid protective net.
The third is to deepen regulatory cooperation. The People's Bank of China will maintain close communication with the Hong Kong Securities Regulatory Commission, the Hong Kong Monetary Authority and other departments, sign a memorandum of supervision and cooperation, and further cooperate closely in information sharing and emergency response.
Q: Is there a specific timetable for implementing "Interchangeable Access"?
A: "Exchangeability" will continue under the overall planning and deployment of China's financial market opening to the outside world. At present, the People's Bank of China will work with the Hong Kong Securities Regulatory Commission, the Hong Kong Monetary Authority and other departments to formulate rules and measures, strengthen regulatory cooperation and information sharing, guide relevant financial market infrastructure to prepare for rules, business and technology, strengthen market communication and cultivation, and guide market members to make preparations before trading. The project will be launched in six months.
The People's Bank of China signed a standing swap agreement with the Hong Kong Monetary Authority and expanded its scale (asked by a reporter)
With the approval of the State Council, the People's Bank of China and the Hong Kong Monetary Authority recently signed a long-term swap agreement to upgrade the currency swap arrangement established by the two sides since 2009 to a long-term swap arrangement. The agreement is long-term, and the swap scale has been expanded from RMB 500 billion/HK$ 590 billion to RMB 800 billion/HK$ 940 billion, so as to further deepen the financial cooperation between the mainland and Hong Kong, better support the construction of an international financial center and promote the steady development of the offshore RMB market in Hong Kong.
The responsible person of the People's Bank of China answered a reporter's question on the RMB /HKD standing swap agreement signed between the People's Bank of China and the Hong Kong Monetary Authority.
Recently, the People's Bank of China and the Hong Kong Monetary Authority announced the signing of a RMB/Hong Kong dollar standing swap agreement. The relevant person in charge of the People's Bank of China answered the reporter's questions on relevant issues.
Q: What are the main contents of the RMB/Hong Kong dollar standing swap agreement reached between the People's Bank of China and the Hong Kong Monetary Authority?
A: Recently, the People's Bank of China and the Hong Kong Monetary Authority signed a RMB/Hong Kong dollar standing swap agreement, which upgraded the currency swap arrangement established by the two parties in 2009 to a standing swap arrangement, and expanded the swap scale from RMB 500 billion/HK$ 590 billion to RMB 800 billion/HK$ 940 billion. Up to now, the People's Bank of China has signed bilateral local currency swap agreements with central banks or monetary authorities of 40 countries and regions, which is the first time that the People's Bank of China has signed a permanent swap agreement. "Standing" mainly means that the agreement is valid for a long time and does not need to be renewed regularly. At the same time, the exchange process will be further optimized and the use of funds will be more convenient.
Q: What are the main considerations for the People's Bank of China to sign a standing swap agreement with the Hong Kong Monetary Authority?
A: The People's Bank of China signed a standing swap agreement with the Hong Kong Monetary Authority mainly to meet the needs of deepening financial cooperation and development between the Mainland and Hong Kong. In recent years, the financial cooperation between the Mainland and Hong Kong has been deepened, and the capital market interconnection mechanisms such as Shanghai-Hong Kong Stock Connect, Shenzhen-Hong Kong Stock Connect, Bond Connect, mutual fund recognition and cross-border wealth management have been continuously promoted. The offshore RMB market in Hong Kong has developed steadily, and Hong Kong has become the most important clearing center, product center and capital center for offshore RMB. The Hong Kong Monetary Authority has always been the main rival of the People's Bank of China. Upgrading the original currency swap to a permanent swap arrangement conforms to the inherent requirements of deepening financial cooperation between the mainland and Hong Kong, and is also the inherent requirement of the open development of financial markets. Internationally, central banks in many economies have similar long-term swap arrangements.
Q: What is the significance of signing a standing swap agreement between the People's Bank of China and the Hong Kong Monetary Authority?
A: Establishing a standing swap arrangement between the People's Bank of China and the Hong Kong Monetary Authority and appropriately expanding the scale of swap funds can provide more stable and long-term liquidity support for the Hong Kong market, help stabilize market expectations, enhance the endogenous development momentum of the market, and better play the role of the offshore RMB business hub in Hong Kong. This year marks the 25th anniversary of Hong Kong's return to the motherland. The signing of this agreement will help to consolidate the status of an international financial center and promote the long-term prosperity and development of Hong Kong's financial industry.
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