Chief Executive John Lee Ka-chiu (third right) officiates at the gong striking ceremony with other guests as he attends the Swap Connect launch ceremony on May 15, 2023. (PHOTO / HKSAR GOVERNMENT)
BEIJING / HONG KONG – The trading of Swap Connect, an interest rate swap market access program, was officially launched on Monday, according to the People's Bank of China (PBOC).
Under the program, domestic and overseas investors will be allowed to conduct renminbi interest rate swap trading and clearing via infrastructure institutions in the Chinese mainland and the Hong Kong Special Administrative Region (HKSAR), the PBOC said in an online statement.
With institutional arrangements made in trading, clearing and settlement, investors will be able to participate in financial derivatives markets on the mainland and in HKSAR without changing their existing trading practices, the central bank said.
The rollout of the program marked an important step in China's financial opening-up and reflected the firm determination of the Chinese central government to support the long-term prosperity, stability and development of the HKSAR, said Pan Gongsheng, deputy governor of the PBOC
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The rollout of the program marked an important step in China's financial opening-up and reflected the firm determination of the Chinese central government to support the long-term prosperity, stability and development of the HKSAR, said Pan Gongsheng, deputy governor of the PBOC, while addressing the launching ceremony.
The Swap Connect will consolidate and improve Hong Kong's status as an international financial center, provide a more convenient channel to manage interest rate risks, and steadily promote China's financial opening-up, the central bank said.
To ensure the smooth running of the program, the PBOC has also worked with Hong Kong Securities and Futures Commission and the Hong Kong Monetary Authority to strengthen regulation and improve liaison and negotiation mechanisms.
Based on the operation of the scheme, operational arrangements will be further fine-tuned, the central bank said.
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Eddie Yue Wai-man, chief executive of the HKMA, said the program will create favorable conditions for global investors to increase their participation in the onshore bond market and carries special significance for enhancing the recognition of and confidence in renminbi bonds in the international market.
Northbound trading of Swap Connect will also provide new opportunities for Hong Kong's financial institutions and strengthen Hong Kong's role as a global risk management center and offshore renminbi hub, he said.
Nicolas Aguzin, CEO of the Hong Kong Exchanges and Clearing Limited (HKEX), said the Swap Connect adds to the ecosystem of renminbi assets that the Connect program offers international investors, and it supports the use of offshore renminbi to invest in the onshore interest rate swap market, all of which provides choice for investors.
The Swap Connect supports the broader sustainable renminbi internationalization process, a very important process that enhances the role of the currency in global markets, Aguzin said in his speech at a launch ceremony.