New | Trading infrastructure for China-Hong Kong Bond Connect can be in place in six months, says ASIFMA
Clearing mechanism for China-Hong Kong bond link needs sorting out
Discussions for a China-Hong Kong Bond Connect scheme have resurfaced, even taking priority over the Shenzhen-Hong Kong Stock Scheme as global regulators descended on Hong Kong to discuss cross-border policy measures and macro-prudential risks over the past week.
Hong Kong Exchanges and Clearing has been inundated with questions regarding the bond programme’s progress. The official line, from Tae Seok Yoo, head of client business development for global markets at HKEx, is that there is “no further update at this stage”. However, sources familiar with the matter said progress towards establishing the scheme is already well underway.
In particular, the trading infrastructure under the Bond Connect scheme could be in place as soon as six months, though it might take up to two years, according an official at the Asia Securities Industry & Financial Association (ASIFMA). “We have made a presentation to the People’s Bank of China (PBOC), the National Association of Financial Market Institutional Investors and other relevant regulators. It was very well received,” said Vijay Chander, executive director for fixed income at ASIFMA.
Chander believes the existing trading mechanism for the Shanghai-Hong Kong Stock Connect scheme connecting the Hong Kong and Shanghai bourses is ready to be expanded to give international investors access to China’s onshore bond market.
“You just need a clearing mechanism that could be connected to CFETS,” he said.
CFETS, the China Foreign Exchange Trade System, is a platform run by the PBOC that provides trading for bonds, derivatives and currencies. It is the leading provider for bond clearing, data, risk management and surveillance services.