HSBC and Tradeweb complete first set of trades under China Swap Connect

HSBC announced it’s completed trades for investors as a designated market maker and clearing broker for clients including Dymon Asia, CSI Capital Management, among several others.

They are the first trades for several overseas and Hong Kong institutional investors on the back of the launch of the Northbound link of Swap Connect, which allows offshore investors to efficiently access China’s onshore derivatives markets.

HSBC concluded trades for several global clients including leading Asia investment managers’ Dymon Asia and CSI Capital Management Limited, with HSBC China acting as the designated market maker and HSBC Hong Kong acting as the mandated clearing broker.

Candy Ho, managing director and head of Business Development for Greater China, Markets & Securities Services at HSBC, said in a statement: “Swap Connect has immediate value for global investors and is a timely move in China’s ongoing commitment to its markets opening up. Today we are pleased to provide our clients with seamless access to a new channel to efficiently manage their renminbi interest rate risks for bond investments.”

HSBC Hong Kong, as an active onshore bond investor, also successfully transacted under Swap Connect with HSBC China and other counterparties.

“Swap Connect makes participating in the world’s second largest fixed income market more attractive by introducing a central clearing model and providing better access to the deep onshore liquidity in financial derivatives markets. We expect to see Hong Kong gain a further foothold as an offshore risk management center,” Ho added in the statement.

Under the initial Northbound link, overseas investors gain access to onshore Interest Rate Swap products priced, settled and cleared in renminbi via Hong Kong’s unique infrastructure.

Shawn Yuan, co-chief investment officer (CIO) of the Dymon Asia Multi-Strategy Investment Fund and CIO of the Dymon Asia China Absolute Return Bond Fund at Dymon Asia Capital, an alternative investment management firm in Asia, said in a statement: “Dymon Asia is proud to be among the first overseas investors to access mainland China’s Interest Rate Swap market today via Swap Connect with the support of HSBC as our market maker counterparty as well as our mandated clearing broker. Swap Connect empowers active global investors like us to efficiently manage interest rate risk for our China bond investments, and in turn makes renminbi-denominated investments more attractive.”

Liang Shi, company director of CSI Capital Management Limited, said in a statement: “We are pleased to have successfully traded on the Swap Connect Northbound link as a welcome next step in China’s bond market opening up to overseas investors after the launch of both CIBM Direct and Bond Connect. With improved access to onshore derivatives products and a smoother risk management experience, we will continue to explore the full potential of China’s fixed income markets.”

As the sixth Connect scheme launched in recent years, Swap Connect signals the continued collaboration between the mainland China and Hong Kong financial markets as well as China’s reopening. Recent additions included Stock Connect, launched in 2014 enabling investors in each market to trade shares on the other market using their local brokers and clearing houses; Bond Connect, launched in 2017 allowing investors to trade in each other’s bond market and Wealth Management Connect, launched in 2021 supporting cross border financial activities for Greater Bay Area residents.

In a separate release, Tradeweb Markets announced it has facilitated its first transactions on Swap Connect and it is currently the only international electronic trading platform that supports both request-for-quote (RFQ) and click-to-trade (CTT) execution protocols. Having previously collaborated with the China Foreign Exchange System (CFETS) to design and launch Northbound Bond Connect, CIBM Direct Link and Southbound Bond Connect, Tradeweb has teamed up again with CFETS to internationalize CNY interest rate swaps (IRS) with the delivery of Swap Connect.

“Tradeweb’s role in connecting China’s financial markets with the rest of the world has achieved another significant milestone with the launch of Swap Connect,” said Enrico Bruni, head of Europe and Asia Business at Tradeweb, in a statement. “As global investors’ exposure to Chinese onshore bonds has grown in recent years, so has their need for effective tools that help them manage risk. Similar to its Bond Connect sibling, Swap Connect embodies the virtues of electronic trading in terms of efficiency, transparency and liquidity.”

“The launch of Swap Connect is a new step towards the opening up of China’s bond market to the rest of world, and we are very pleased to collaborate with Tradeweb again to jointly support overseas investors’ participation in the domestic financial derivatives market through Northbound Swap Connect in a convenient and efficient manner,” said Zhang Yi, president of CFETS. “CFETS will continue to optimize various mechanisms to provide efficient and convenient financial infrastructure services for international investors to participate more deeply in China’s financial market and meet their diversified trading requirements.”

SwapC Connect is China’s new electronic trading channel for CNY IRS. In its initial phase, the Swap Connect program will connect offshore investors with mainland China’s interbank CNY IRS market through a Northbound route. Once onboarded with Tradeweb for Swap Connect trading, clients can place orders using the RFQ or CTT electronic execution protocols, and can clear trades through HKEX OTC Clear (OTCC) under Hong Kong’s internationally familiar legal framework.

“We are pleased to announce that Standard Chartered has been an active participant on Swap Connect, both as a market maker in mainland China and as an investor in Hong Kong,” said Charles Feng, head of Macro Trading for Greater China & North Asia at Standard Chartered, in a statement. “Swap Connect, tapping the deep and liquid interest rate swap market in mainland China, will provide international investors in the RMB bond market new and critical risk management tools. This virtuous cycle, cash bonds and the hedging tools, formed between Bond Connect and Swap Connect will likely encourage continued strong interest in the opening of the China bond and derivatives markets to international investors for years to come.”

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