In a bid to promote the development of the debt market infrastructure in the Mainland China and Hong Kong, the Hong Kong Monetary Authority (HKMA) and China Government Securities Depository Trust & Clearing Co. Ltd. (CDC) have agreed in principle to establish a link between their securities settlement systems. The link between the HKMA's Central Moneymarkets Unit (CMU) and CDC's Government Securities Book-Entry System (GSBS) will enable Mainland financial institutions authorised to deal in foreign exchange transactions to hold and settle debt securities in Hong Kong.
Taking advantage of the CMU's interface with the Hong Kong dollar and US dollar Real Time Gross Settlement systems in Hong Kong, Mainland investors will also be able to settle Hong Kong dollar and US dollar denominated debt securities on a real time delivery versus payment (DvP) basis. This will reduce settlement risk arising from cross-border trades or time zone differences. Moreover, with the new link from CMU to Euroclear, Euroclear Bank's settlement system, soon to be established, Mainland financial institutions will be able to hold and settle international debt securities lodged with Euroclear. They will also be able to settle by real time DvP during Asia's time zone US dollar denominated and other debt securities issued in different parts of the world. The provision of secure and efficient settlement service will enhance risk management by Mainland investors engaged in cross-border debt securities trades.
The CDC is empowered by the Ministry of Finance to operate a nationwide government securities registration and settlement system. It provides registration, custodian, settlement and interest and principal collection services for financial debt securities designated by the People's Bank of China as well as other debt instruments. It also handles the custodian, registration and settlement arrangements for foreign currency fixed income securities as well as related fund settlement and international business.
Welcoming the joint initiative, Mr Joseph Yam, Chief Executive of the HKMA, said the link would not only strengthen co-operation between Mainland and Hong Kong in the development of financial infrastructure, but help promote the growth of regional debt markets. He pledged the HKMA's continued efforts in improving Hong Kong's financial infrastructure so as to reinforce its status as a regional debt centre and an international financial centre.
Ms Lu Shiyun, General Manager of the CDC, also welcomed the plan. She said, "In view of the rapid development of financial markets, including the debt securities market, in the Mainland and to keep in line with international practices, the CDC has worked, since its inception in 1996, to establish a unified settlement system for China's government securities markets. We provide central registration, custodian and settlement services for government securities, financial debt securities and other debt instruments. The link between the central securities depositories in Mainland and Hong Kong will enable investors to settle their trades in a secure environment, thus reducing the settlement risk borne by Mainland financial institutions permitted to engage in foreign exchange business when trading in debt securities issued in Hong Kong and around the world."
The HKMA and CDC will discuss the specific arrangements of the link in due course.
For further enquiries, please contact:
Sylvia Yip, Manager (Press), at 2878 1687 or
Thomas Chan, Senior Manager (Press), at 2878 1480
Hong Kong Monetary Authority
China Government Securities Depository Trust & Clearing Co. Ltd.
15 January 2002
