Financial regulators in mainland China and Hong Kong rolled out enhancements to the Swap Connect scheme on Monday to further open up China’s financial markets and strengthen Hong Kong’s status as an international financial centre, reports the South China Morning Post. The scheme, launched in Hong Kong a year ago, has been instrumental in allowing global investors to access mainland China’s interbank financial derivatives market to hedge interest-rate risks.
The People’s Bank of China, Hong Kong’s Securities and Futures Commission and the Hong Kong Monetary Authority announced three enhancements. First, Swap Connect will accept interest rate swap contracts with payment cycles based on the International Monetary Market (IMM) dates to “align with mainstream products traded globally and meet the diverse risk management needs of mainland and overseas investors,” according to a joint press release.
Second, ancillary services like compression and clearing of backdated swap contracts will be introduced to help participating institutions manage the notional amount outstanding, reduce capital costs and foster active trading.