Ted Hirokawa
May 15, 2025 06:35
PBOC, SFC, and HKMA will expand swap connectors, improve product types, and expand contract tenor to support the opening of the financial market in mainland China.
PBOC (People’s Bank of China), Hong Kong Securities and Futures Commission (SFC), and Hong Kong Monetary Authority (HKMA) announced plans to expand the swap connect system to further open the financial market in mainland China. This initiative successfully started a mutual access system between mainland and Hong Kong interest rate swap market on May 15, 2023, which showed a significant increase in trading volume.
Improvement to swap connect
At first, SWAP Connect, designed to promote access to the mainland interest rate swap market, will expand product offering. Improvements include extending the interest rate swap contract to 30 years to solve various risk management demands. In addition, the product range is widened by including interest rate swap contracts using the loan prime rate (LPR) as a reference rate.
The decision to improve the swap connect is based on the operation feedback and aims to promote the development of the financial derivatives market in the mainland and Hong Kong. As of April 2025, the system promoted more than 12,000 transactions with the cumulative command value of RMB 6.5 trillion, including 20 mainland dealers and 79 overseas investors.
Strategic goals and market impact
The strategic expansion of SWAP Connect is part of a wide range of national strategies that continue to develop the financial market in the mainland. The regulatory authorities aim to enhance the charm of RMB assets, support RMB internationalization, and strengthen Hong Kong’s status as a global financial hub.
Regulatory institutions in the mainland and Hong Kong will continue to guide the financial market infrastructure operators and implement improvements effectively. The continuous development of the Swap Connect is expected to promote steady, orderly and sound development in the internationalization of the Chinese financial market.
Future prospect
PBOC, SFC and HKMA are doing our best to provide the necessary regulatory guidelines to support the successful implementation of these improvements. The goal is to strengthen the cooperation development of financial markets throughout the mainland and Hong Kong to open a strong framework for future financial innovation and opportunities for global investors.
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