Hong Kong Exchanges and Clearing Limited (HKEX) announces that its clearing subsidiary OTC Clear has implemented three enhancements to Swap Connect in partnership with China Foreign Exchange Trade System (CFETS) and Shanghai Clearing House (SHCH).

The enhancements will provide more flexibility for international investors to manage RMB interest rate risk through China’s onshore interbank markets.

The new enhancements include:

• The introduction of International Monetary Market (IMM) trades based on IMM dates, i.e. the third Wednesday of March, June, September and December, to align with common practices on international interest rate swap markets.
• The launch of solo compression service that enables participating institutions to compress trades with equal but opposite economics. Through this service, Swap Connect participants may unwind their original cleared trades before the maturity date, reducing their capital costs and increasing transaction settlement efficiency.
• The introduction of backdated trades, which allow trades with a past effective date and can be used with solo compression for trade unwinding.

To reduce transaction costs for Swap Connect participants, OTC Clear, CFETS and SHCH will continue to waive their trading and clearing fees for one year. The fee for compression service will also be waived in its initial stage.

Swap Connect, a mutual access programme linking Hong Kong and Mainland China’s interbank interest rate swap markets, has seen smooth operations and steady increases in trading volume since its launch on 15 May 2023, adding vibrancy into both Hong Kong and Mainland China’s financial markets.

In celebration of the first anniversary of Swap Connect, HKEX has launched the enhancements in partnership with CFETS and SHCH with the support of Hong Kong and Mainland China regulators. These measures are aimed at enabling more international institutional investors to manage interest rate risk on their continuously increasing RMB bond investment with RMB interest rate swaps, enhancing Hong Kong’s competitiveness as an international financial centre and supporting the internationalisation of RMB.

A total of 26 onshore and offshore institutions have conducted IMM trades with an aggregate nominal amount of RMB 5.48 billion today. Four onshore and offshore institutions have used the solo compression service, reducing nominal amount of RMB 5.5 billion.