HKEX Supports Launch of Swap Connect for Hong Kong and Mainland China Markets

Hong Kong Exchanges and Clearing Limited (HKEX) has expressed its approval for the launch of Swap Connect, a mutual access program between Hong Kong and Mainland China’s interbank interest rate swap markets. The program, which is set to commence on May 15, 2023, will initially offer a Northbound channel, providing Hong Kong and international investors with access to Mainland China’s interbank financial derivatives market through a connection between financial infrastructure institutions in both markets.

HKEX, through its clearing subsidiary OTC Clear, has collaborated with China Foreign Exchange Trade System (CFETS) and Shanghai Clearing House (SHCH) to develop the infrastructure necessary for Swap Connect and will be responsible for facilitating the delivery and operation of the program.

Nicolas Aguzin, HKEX Chief Executive Officer, stated, “Swap Connect is the latest chapter in our Connect story. As the world’s first derivatives mutual market access program, 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 center. 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 the Swap Connect framework, CFETS and overseas electronic trading platforms recognized by the People’s Bank of China (PBOC) will jointly offer trading services to Hong Kong and international investors. Initially, the program will provide access to interest rate swaps, which will be priced, settled, and cleared in Renminbi.

OTC Clear and SHCH will jointly deliver clearing and settlement services through a central counterparties link. OTC Clear will handle central clearing services for Hong Kong and international investors, while SHCH will provide central clearing services for investors in Mainland China. OTC Clear is an SFC-recognized clearing house and an internationally-recognized qualifying central counterparty that offers clearing and settlement services for OTC derivative transactions.