On 28 Apr. 2023, the People’s Bank of China (PBC) issued the “Interim Measures for the Administration of Mutual Access Between the Mainland and Hong Kong Interest Rate Swap Markets” (hereinafter the “Measures”, 內地與香港利率互換市場互聯互通合作管理暫行辦法).
The Measures focuses on the “Swap Connect”, which is an institutional arrangement that enables domestic and overseas investors to participate in the Hong Kong financial derivatives market and the mainland interbank financial derivatives market through a connection between Hong Kong and mainland infrastructure institutions.
The Measures shall apply to the “Northbound Trading of Swap Connect”, which is an arrangement that allows overseas investors from Hong Kong and other countries and regions (hereinafter the “overseas investors”) to access the mainland interbank financial derivatives market through mutual access between Hong Kong and mainland infrastructure institutions in aspects such as trading, clearing, and settlement.
The rules for “Southbound Trading of Swap Connect” will be formulated separately.
Overseas institutional investors that meet the requirements of the PBC and have completed the filing for access to the interbank bond market may invest in the mainland interbank financial derivatives market through the “Northbound Trading of Swap Connect” and engage in derivatives transactions for risk management purposes.
Interest rate swap products are eligible for trading in the early phase of the “Northbound Trading of Swap Connect”. The interest rate swaps of the “Northbound Trading of Swap Connect” will be quoted, traded, and settled in RMB.
Contributors: CJO Staff Contributors Team
