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HKEX's OTC Clear adds clearing for USD/CNH CCS

First Published 15th August 2016

Hong Kong Exchanges and Clearing's OTC Clear is the first international clearing house to provide clearing for USD/CNH cross currency swaps.

OTC Clearing Hong Kong (OTC Clear), a subsidiary of Hong Kong Exchanges and Clearing, has launched its clearing service for cross currency swaps. OTC Clear is initially providing clearing for swaps in the USD/CNH (US Dollar/Offshore Renminbi, or RMB) currency pair.

OTC Clear provides a Payment versus Payment - or PvP - settlement solution through the Real-Time Gross Settlement system operated by the Hong Kong Monetary Authority, which eliminates so-called "Herstatt" or settlement risk. OTC Clear has appointed Industrial and Commercial Bank of China (Asia) and Standard Chartered Bank (Hong Kong) as the settlement banks to conduct PvP settlement.

Several transactions were submitted to OTC Clear once the service was launched. Two of them, Bank of China (Hong Kong) versus The Hongkong and Shanghai Banking Corporation and Industrial and Commercial Bank of China (Asia) versus Standard Chartered Bank, showed the new clearing service helps to facilitate trading between international and Chinese banks. The other transaction, a trade between Hang Seng Bank and The Hongkong and Shanghai Banking Corporation, showed that there is local bank demand for CCS clearing.

All trades are submitted to OTC Clear via MarkitSERV, a trade affirmation platform operated by IHS Markit. Some of the trades are being conducted via Tradition (Asia) Ltd.

The total aggregate notional value of US$120 million was cleared as of 4 pm on the first day.