The Securities and Futures Commission (SFC) is pleased to note that OTC Clearing Hong Kong Limited (OTC Clear) today started accepting the Ministry of Finance and Mainland policy banks onshore bonds held under Northbound Bond Connect (CGBs) by offshore investors as margin collateral for Northbound Swap Connect transactions (Note 1).
Building upon the arrangement, the SFC, together with the People’s Bank of China (PBoC) and the Hong Kong Monetary Authority (HKMA), have reached a consensus that offshore investors will be able to use CGBs as margin collateral for all other eligible derivative transactions cleared in OTC Clear.
“We welcome the PBoC’s support of the new initiative to broaden the use of onshore bonds as collateral in the offshore market. Global institutional investors can benefit from further reduction in liquidity cost with more efficient use of their onshore RMB bonds as non-cash collateral when clearing with OTC Clear,” said Mr Rico Leung, the SFC’s Executive Director of Supervision of Markets.
“The new measure will also go a long way towards strengthening Hong Kong’s position as a leading global offshore RMB hub and advancing the development of its fixed income market,” Mr Leung added.
Details of the new arrangement, which is subject to regulatory review, will be announced in due course.
Note:
- Please see joint SFC-HKMA press release dated 9 July 2024 and OTC Clear’s press release dated 16 December 2024.
