Real Time Gross Settlement (RTGS) Systems in Hong Kong and Reuters Dealing 3000

The Hong Kong Monetary Authority (HKMA) is pleased to note that Reuters has made a software enhancement on its Dealing 3000 (D3000) to facilitate the use of the local US dollar RTGS system by financial institutions in Hong Kong for settling foreign exchange transactions.

This software enhancement in the electronic brokerage system of Reuters will facilitate straight-through processing by ensuring that the tickets from D3000 contain the appropriate payment instructions for the settlement of foreign exchange transactions between the US dollar and the Hong Kong dollar via the respective Real Time Gross Settlement (RTGS) systems in Hong Kong. Most such transactions are settled on a payment versus payment (PvP) basis. Financial institutions in Hong Kong will be the first to benefit from this enhancement when the software is available in mid-March 2002. The new function will subsequently be available globally to all Reuters D3000 users.

D3000 Matching (spot and forwards) automatically produces settlement instructions from a client maintained database. With the new enhancement Reuters will provide an additional payment field for the US dollar and Hong Kong dollar, where clients will be able to load their relevant RTGS instructions. This extra field will only be available for RTGS eligible currencies. This list of currencies will be expanded if and when new currencies join RTGS systems.

In order that Reuters matching host can automatically attach a RTGS instruction when a trade is executed with a RTGS participating bank, a new Settlement Group named "HKMA" has been created. Within this group clients will be able to "flag" those banks with whom they wish to settle via RTGS. On D3000 Direct (conversation element of Dealing) traders can enter payment instructions in free format text. As a result, there will be no need to modify this system, as the resultant tickets will pick up the RTGS payment instruction text automatically.

"We welcome the new functionality of Reuters D3000 and are pleased to learn that Hong Kong will be the first financial centre to implement this enhancement," said Mr Tony Latter, Deputy Chief Executive of the HKMA. "This is a good example of the financial community supporting our efforts to upgrade the financial infrastructure of Hong Kong," he added.

The US dollar RTGS system has been linked to the Hong Kong dollar RTGS system to provide PvP settlement for foreign exchange transactions between the US dollar and Hong Kong dollar in Hong Kong since September 2000. The PvP transaction allows the settlement of US dollar transactions real time in the Asian time zone against the delivery of Hong Kong dollar, thereby entirely eliminating the "Herstatt" risk that arises if the US dollar leg can only be settled some 12 hours later in New York time.

The US dollar RTGS payment system has been well received by the financial community in Hong Kong since its inception in August 2000. There are currently 64 direct and 125 indirect participants. Among the indirect participants, 84 are from overseas. Turnover has been growing steadily. In 2001, the daily turnover was typically 2,700 to 3,000 transactions with a value of over US$4　billion. In January 2002, the daily turnover exceeded 3,000 transactions, with a value of US$4.9　billion. Within the total, the usage of PvP has been rising; it accounted for about a third of the US dollar RTGS turnover by value in 2001.

For further enquiries, please contact:

Jasmin Fung, Manager (Press), at 2878 8246 or
Sylvia Yip, Manager (Press), at 2878 1687

Hong Kong Monetary Authority
27 February 2002