BEIJING, Feb. 20 (Xinhua) -- The People's Bank of China (PBOC), the Chinese central bank, released its opinion-inviting rules on the mainland-Hong Kong interest rate swap connect (Swap Connect) schemes on February 17, reported Xinhua Finance.
PBOC took the move to provide principles for mechanism arrangements and regulatory requirements for the Swap Connect, a mutual market access scheme linking the financial derivative markets in the Chinese mainland and Hong Kong Special Administrative Region (HKSAR).
In July 2022, PBOC jointly announced with the local financial authorities in HKSAR to launch the Swap Connect as overseas investors boasted increasing demand for Renminbi (RMB) interest rate risk management alongside the widening opening-up of China's interbank bond market in recent years.
Applicable to northbound trading which enables overseas investors to participate in the interbank financial derivatives market in the Chinese mainland, the interim rules provide that tradable products at the initial stage are interest rate swap products with RMB as the currency for related quotation, transaction and settlement. For southbound trading, related rules will be formulated separately.
Overseas investors eligible for northbound trading of Swap Connect shall meet related requirements of PBOC and complete entry filing on China's interbank bond market, according to the rules. For qualified investors in the Chinese mainland, they are required to sign related market maker agreements.
Overseas investors who use foreign exchanges to take part in clearing of northbound trading under Swap Connect are permitted to open RMB account at a settlement bank in HKSAR to handle related fund exchange and settlement business. Exchange of related funds is required to be included in RMB purchasing and sales for management. (Edited by Duan Jing with Xinhua Silk Road, duanjing@xinhua.org)
A single purchase
