15-05-2025
- Business
- South China Morning Post
China to enhance Swap Connect by extending tenor, use loan prime rate as reference
Mainland China and Hong Kong are expanding the product offerings under the Swap Connect scheme, increasing the tools to manage interest-rate risks, as regulators look to further open up the capital market to global investors.
The tenor of interest-rate swap contracts would be extended to 30 years from 10 years 'to meet the diverse risk management needs of market institutions', the Securities and Futures Commission (SFC) said in a statement on Thursday. Contracts using the onshore Loan Prime Rate as the reference rate would also be introduced, it added.
'Relevant infrastructure operators in both markets will implement these enhancement measures progressively,' the SFC said, following its joint effort with the People's Bank of China and the Hong Kong Monetary Authority.
Swap Connect, launched in
May 2023, is the world's first derivatives mutual market access programme, with its initial phase designed to help global investors manage interest-rate risks when they invest in yuan-denominated bonds. The scheme was updated last year to enable institutions to trim capital costs and foster active trading.
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Swap Connect allows domestic and foreign investors to conveniently complete interest-rate swap transactions, according to regulators. It centralises clearing through mutual access in terms of trading, clearing and settlement, without changing trading habits and in compliance with the laws and regulations of both markets.
