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Regulators in Hong Kong to develop Swap Connect for offshore investors

The Securities and Futures Commission (SFC), Hong Kong, the People’s Bank of China, and the Hong Kong Monetary Authority have announced that OTC Clearing Hong Kong, China Foreign Exchange Trade System (National Interbank Funding Center), and Shanghai Clearing House are collaborating to develop Swap Connect, a new mutual market access programme.

Swap Connect would allow offshore investors to transact in interest rate derivatives with onshore investors in Mainland China. This would be an efficient way for offshore investors to manage interest rate risks arising from investments in the Mainland bond market.

The northbound link will be introduced first, according to the joint announcement.

“Building on the success of Stock Connect, mutual market access between the Mainland and Hong Kong has gradually expanded to other channels,” said Ashley Alder, the SFC’s Chief Executive Officer. “The extension of market access to over-the-counter derivatives through Swap Connect will be another milestone, enabling global investors to participate more broadly in the vast Mainland bond market.”

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