Source: People's Bank of China
Original title: “Optimizing the “Interchange” Mechanism Arrangements to Promote a High Level of Opening-up of China's Financial Markets to the Outside World
In order to implement the strategic plan of the Party Central Committee and the State Council to steadily promote the opening up of China's financial market to the outside world, the Mainland and Hong Kong Interest Rate Exchange Market Connectivity Cooperation (hereinafter referred to as “Exchange”) was officially launched on May 15, 2023. Since the launch of the business, mechanisms such as transaction settlement have been running smoothly, domestic and foreign investors have actively participated, and business volume has continued to rise.
By the end of April 2024, 20 domestic bidders and 58 overseas investors had reached more than 3,600 RMB interest rate swap transactions, with a total nominal principal amount of about 1.77 trillion yuan, and an average daily nominal principal amount of about 7.6 billion yuan. The average daily nominal principal amount on a monthly basis had increased nearly 3 times, from about 3 billion yuan per day in the first month of listing to more than 12 billion yuan per day in April 2024, providing a convenient and efficient risk management tool for domestic and foreign investors to carry out RMB asset allocation.
In order to further promote the collaborative development of financial derivatives markets between the Mainland and Hong Kong and establish a high-level financial openness pattern, the People's Bank of China, the Hong Kong Securities and Futures Commission, and the Hong Kong Monetary Authority support further optimization of the “swap” mechanism arrangement on the basis of fully summarizing the “swap” operation experience and listening carefully to the opinions and suggestions of domestic and foreign investors.
The first is to diversify product types, launch interest rate swap contracts with the settlement date of the international currency market as the payment cycle, which are in line with mainstream international trading types to meet the diverse risk management needs of domestic and foreign investors.
The second is to improve supporting functions, launch historical interest contracts for contract reduction services and supporting support, facilitate participating institutions to manage the scale of contract business during the lifetime, reduce capital consumption, and activate market transactions.
In addition, the National Interbank Lending Center, Interbank Market Clearing House Co., Ltd., and Hong Kong OTC Clearing Co., Ltd. will simultaneously introduce other system optimization and preferential measures to reduce the cost of business participation for domestic and foreign investors.
In the next step, the Mainland and Hong Kong regulators will guide the financial market infrastructure institutions of the two regions, continue to promote “interchange” business cooperation in a steady and orderly manner, continue to improve various institutional arrangements, help steadily expand the opening up of China's financial market to the outside world, and consolidate and enhance Hong Kong's status as an international financial center.
editor/tolk