Swap Connect launches as first derivatives trading link between Mainland China and Hong Kong

New programme initially launches with a Northbound channel, offering Hong Kong and international investors access to Mainland China’s interbank interest rate swap markets.

The People’s Bank of China (PBOC), Hong Kong Securities and Futures Commission (SFC) and Hong Kong Monetary Authority have launched Swap Connect, a new mutual access programme between Hong Kong and Mainland China’s interbank interest rate swap markets.

Initially starting with a Northbound channel, Swap Connect will offer Hong Kong and international investors access to Mainland China’s interbank financial derivatives market via a connection between financial infrastructure institutions in the Hong Kong and Mainland China markets.

Hong Kong Exchanges and Clearing (HKEX) welcomed the launch of Swap Connect and through its clearing subsidiary – OTC Clear – has been working with China Foreign Exchange Trade System (CFETS) and Shanghai Clearing House (SHCH) to develop the underlying infrastructure for Swap Connect alongside facilitating the delivery and operation of the programme.

“Swap Connect is the latest chapter in our Connect story. 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, chief executive of HKEX.

“We look forward to working with our Mainland partners and all our regional and international market participants to ensuring the successful rollout of Swap Connect, as we connect China and the world.”

Under Swap Connect, CFETS and PBOC-recognised electronic trading platforms overseas will jointly provide trading services for Hong Kong and international investors. At the initial stage, the programme will provide access to interest rate swaps which will be priced, settled and cleared in Renminbi.

Clearing and settlement services will jointly be provided by OTC Clear and SHCH through a central counterparties link, with OTC Clear providing central clearing services for Hong Kong and international investors, while investors in Mainland China will receive central clearing services from SHCH.

Following today’s launch, HSBC, Standard Chartered, Tradeweb and Citibank China have all announced that they have successfully executed Swap Connect transactions.