Hong Kong exchange expands use of Chinese bonds as margin collateral, regulator welcomes move
Hong Kong Exchanges and Clearing has widened use of Chinese government and policy bank bonds as non-cash margin collateral to listed derivatives clearing houses, and cut financing fees to 0.15 per cent. The Securities and Futures Commission welcomed the move, saying it boosts capital efficiency and
Hong Kong Exchanges and Clearing (HKEX) has expanded the range of eligible non-cash margin collateral to include onshore Chinese government bonds and bonds issued by mainland policy banks held under the Bond Connect northbound channel, as well as offshore government bonds. The new rules also apply to listed derivatives clearing houses. In addition, HKEX has lowered the financing fee for non-cash margin collateral provided by clearing house participants to an annual rate of 0.15 per cent.
The Securities and Futures Commission (SFC) welcomed the measures. Leung Chung-yin, executive director of the market supervision division, said they would not only reduce financing costs for market participants but also help expand the use of such margin collateral in the offshore market.
He said the optimisation measures, together with the reduction in financing fees, would unlock capital efficiency, increase market participation, and enhance the global appeal of yuan-denominated assets to overseas institutional investors. This would in turn promote the internationalisation of the yuan, further consolidate Hong Kong's position as a leading offshore yuan hub, and support the continued development of the city's fixed-income and currency market ecosystem.
The SFC noted that expanding the use of mainland bonds as margin collateral is a short-term measure under its strategic action plan to support implementation of Hong Kong's first five-year plan and the latest Policy Address. It is also one of the measures announced by the People's Bank of China in July aimed at supporting the development of Hong Kong's fixed-income and currency markets.