Bloomberg and Hong Kong Exchanges and Clearing (HKEX) have enhanced their Swap Connect solutions to better facilitate global investments in China’s onshore interbank interest rate swap (IRS) markets.
The development coincides with the latest enhancements applicable to the Northbound Swap Connect scheme, which commence today and are introduced by China Foreign Exchange Trade System (CFETS), Shanghai Clearing House, and OTC Clearing Hong Kong.
Bloomberg’s enhancements to its Swap Connect solution include new features that support IRS contracts with International Monetary Market (IMM) dates and the ability to offset existing contracts in global investors’ portfolios.
Swap Connect is the OTC derivatives trading link between Mainland China and Hong Kong, which allows market participants to trade IRS.
Read more: Swap Connect launches as first derivatives trading link between Mainland China and Hong Kong
The new acceptance of mainstream IMM dates-based IRS contracts will enable the scheme to further meet investors’ risk management needs, according to Bloomberg.
The offset services will also allow investors to compress eligible IRS contracts with equal and opposite economics at the clearing house, helping reduce capital costs and bolster trading.
HKEX’s subsidiary for clearing has also implemented enhancements to Swap Connect in partnership with CFERS and SHCH.
The enhancements will offer improved flexibility for international investors to manage RMB interest rate risk through China’s onshore interbank markets.
The new measures aim to enable more international institutional investors to manage interest rate risk on RMB bond investments with RMB interest rate swaps, which will ultimately help bolster Hong Kong’s competitiveness and supporting the internationalisation of RMB.
“As we reflect upon one year of Swap Connect in operation, it is only fitting that the first derivatives mutual market access scheme between Mainland China and Hong Kong is taking another significant step forward,” said Dahai Wang, head of Greater China at Bloomberg.
“We will continue to work closely with our partners to optimise this solution, empowering global investors and helping to deliver new levels of access to China’s onshore financial markets.”