"Conversion" will appear after 6 months to facilitate the management risk of foreign investors' usage interest rate swap management

On July 4th, Pan Gongsheng, Vice President of the People's Bank of China and director of the State Administration of Foreign Exchange, said at the fifth anniversary forum and "swap" release ceremony of the "Bond Connect". Implementation will further improve the efficiency of the financial markets of the two places and consolidate the status of Hong Kong International Financial Center and offshore RMB business hubs.

On the same day, the People's Bank of China, the Hong Kong Securities and Futures Affairs Supervision Committee (hereinafter referred to as the "Hong Kong Securities Regulatory Commission") and the Hong Kong Financial Administration issued a joint announcement to conduct the interconnection and cooperation between the Hong Kong and the Mainland interest rate exchange market (hereinafter referred to as the "swap" ), Officially started after 6 months.

On the same day, the People's Bank of China also issued an announcement saying that the People's Bank of China recently signed a stand -up exchange agreement with the Hong Kong Financial Administration to upgrade the currency swap arrangement established by the two parties from 2009 to a standing for exchange arrangement. The agreement has been effective for a long time. The scale expanded from the original 500 billion yuan/590 billion Hong Kong dollars to 800 billion yuan/940 billion Hong Kong dollars. This is also the first time that the People's Bank of China has signed a stand -up exchange agreement.

"North Tongtong" first opened in the early stage

The so -called "swap" refers to the arrangement of the mechanism of the two financial derivatives markets through Hong Kong and the mainland infrastructure institutions through Hong Kong.

According to the joint announcement, the "Northern Tongtong" was opened in the early days of "SCT", that is, overseas investors from Hong Kong and other countries and regions (hereinafter referred to as "overseas investors") through Hong Kong and Mainland infrastructure institutions in transactions and liquidation In terms of settlement and other interconnection mechanism arrangements, participate in the financial derivative market between the Mainland banks. In the future, it will be extended to "south direction" in a timely manner, that is, domestic investors will participate in the Hong Kong financial derivative market through the interconnection mechanism arrangements between the two places infrastructure institutions.

"Swap" abide by the relevant laws and regulations of the markets of the two places. The "north direction" follows the current financial derivatives market in the Mainland to open the policy framework for opening up to the outside world. At the same time, it respects international practice and convenient foreign investors to carry out the trading and risk hedge of financial derivatives between the Mainland banks. The initial stage of transaction targets is interest -rate exchange products, and other varieties will be opened in time according to market conditions.

In response to the reporter's question, the relevant person in charge said that the launch of the "swap" can facilitate the management risk of interest rate exchange management of foreign investors, reduce the impact of interest rate fluctuations on the value of bonds, and slowly flow in funds to further promote the renminbi globalization.

"Interest rate exchange is the interest exchange of different interest rates, which are often used for hedging interest rate risks." CITIC Securities Chief Economist said in an interview with the Securities Daily reporter that since 2017, the launch of "Bond Connect" has launched the launch of "Bond". The degree of opening up in my country's bond market has continued to deepen, and the demand for overseas investors' debt holdings expands and its needs to use derivatives to manage interest rate risks will increase accordingly. The launch of this "swap" uses the "bond" financial market infrastructure connection method to open up the channels for overseas institutions to participate in the interest rate exchange market, which can meet the needs of overseas institutions for hedge interest rate risks.

Wang Youxin, a senior researcher at the Bank of China Research Institute, told a reporter from the Securities Daily that the launch of the "Conversion" business meets the needs of overseas investors to manage RMB interest rate risks. Choose the appropriate interest rate payment method for your own asset -liability structure, which is conducive to the impact of rectangular interest rate fluctuations on the value of bonds. The cross -border capital flow of the smooth bond market makes foreign investors pay more attention to the long -term investment value of the Chinese bond market without the need for because Short -term market fluctuations and passively adjusted asset allocation.

From the perspective of RMB internationalization, it is clearly believed that the current internationalization of the RMB is more reflected in the trade settlement currency function, and the RMB investment and financing currency function is still backward. To further promote the internationalization of the RMB, it is necessary to continuously deepen the openness of the RMB financial market. When the overseas RMB capital pool increases to a certain scale, it is necessary to match the overseas RMB asset pool to provide sufficient investable RMB assets. It is not enough to open the RMB bond market at present. The open interest rate exchange market is essential to provide corresponding risk hedging tools. This will help enhance the liquidity of RMB assets and is of great significance to the internationalization of the RMB.

Innovation derivative clearing institution

Interconnection

The relevant person in charge of the aforementioned said that on the basis of adhering to the development of the current inter -bank derivative market development, "SCT" comprehensively borrowed from the mature experience and overall framework of the bond market opening to the outside world, and connected the latest development trend of the overseas derivative market. The core of transactions and central opponents have optimized the existing process as the core, and improved transaction liquidation efficiency.

Under the "swap", domestic and foreign investors can conduct transactions through the connection of related electronic trading platforms without changing the trading habits. At the same time, the "SCT Tong" innovates the interconnection mode of the derivative clearing institution, and the two central opponents will provide central and foreign investors with centralized liquidation services for RMB interest rate swaps. Investors at home and abroad can easily complete the transactions and centralized liquidation of RMB interest rate exchange on the premise of complying with market laws and regulations of the two places.

"Securities Daily" reporter learned from the China Foreign Exchange Trading Center (hereinafter referred to as the "Foreign Exchange Trading Center") that the foreign exchange trading center and the interbank market liquidation center (hereinafter referred to as the "Shanghai Clearance Office"), the Hong Kong Exchange Group The three parties of Hong Kong Overseas Settlement Co., Ltd. (hereinafter referred to as the "Hong Kong Overseas Settlement Company") Three parties jointly support the development of the "Conversion" business by establishing an infrastructure connection. Initially supporting overseas investors to conveniently participate And liquidation. Foreign exchange trading centers provide derivatives trading services for domestic and foreign investors, and do not change domestic and overseas derivatives electronic trading habits as the starting point. They support foreign investors to access the foreign third -party electronic trading platform recognized by the People's Bank of China. The trading system has reached derivative transactions with domestic quotation agencies. The foreign exchange trading center sends the transaction reached in real time to the central opponent's party clearing institution (hereinafter referred to as "CCP") for centralized liquidation to achieve the transaction liquidation direct processing and efficient connection of the whole process.

The Shanghai Clearance Institute and the Hong Kong Overseas Settlement Company interconnected through the CCP to jointly provide centralized liquidation services. Among them Risk preparation resources cover the potential losses of each other's breach of contract.

"Conversion" fully draws on the current inter -bank bond market opening experience and model of the current inter -bank bond market: the trading side, through the direct connection of the CCP of the two places with the two places, the clearing end, through the innovative CCP interconnection mechanism, in the agreement rules, entering the market, entering the market, entering the market. Trading, liquidation settlement, risk management and other links, reduce the difficulty and complexity of domestic and foreign investors' participation. The integration mechanism of transaction liquidation has provided more convenient and efficient channels for domestic and foreign investors to participate in the financial derivatives markets of the two places.

Further improvement

The financial market of the two places Unicom efficiency

While innovation, preventing risks is also essential. The aforementioned person in charge stated that effective prevention of risk is the basis for the high -quality development of the financial derivative market, and it is also the core principle that it adheres to the "interchange" work. In terms of specific measures, first of all, it is to ensure the order of transactions and the overall risk of the market; second, it is to strengthen the risk management arrangements between the financial market infrastructure of the two places; and again, it is to deepen supervision and cooperation.

Yu Weiwen, President of the Hong Kong Monetary Administration, said that the focus of work in the next stage is to provide diversified risk management tools for "Northbound" investors to enhance the function of the Hong Kong Risk Management Center.

Pan Gongsheng pointed out that the experience of China's financial market development shows that expanding and opening up is the strong driving force for the development of marketization, rule of law, and internationalization of China's financial markets, and a key move to further enhance China's financial market to serve the real economy capabilities. As an international financial center, Hong Kong has many favorable conditions and unique advantages. It is an important window and bridge for the opening of the financial market in the Mainland. It is also an important test site for the "first trial" of the country's opening -up strategy.

"Continue to unswervingly expand the high -level opening of China's financial market to the outside world, and support the prosperity and development of the Hong Kong International Financial Center is the established policy of the central government and an important task of the People's Bank of China." Pan Gongsheng said.

(Editor in charge: Chang Shuai Shuai)

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