OTC Clearing Hong Kong (OTC Clear) has launched a clearing service for cross-currency swaps (CCS), which will initially focus on swaps in the USD/CNH currency pair.
OTC Clear is the first international clearing house to provide clearing for USD/CNH CCS, the company claims in a statement.
The firm 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, it explains.
It currently has 12 clearing members, including six Hong Kong subsidiaries or branches of Chinese banks. Several other financial institutions are currently working on clearing membership admission arrangements, it adds.
Since the launch of the service, the firm says “several” transactions were submitted to OTC Clear including two between the Bank of China (Hong Kong) and HSBC, as well as ICBC and Standard Chartered. This shows “the new clearing service helps to facilitate trading between international and Chinese banks”, the firm says.
The total aggregate notional value of $120 million was cleared as of 4 pm on the first day, OTC Clear states.
“OTC FIC (fixed income and currency) market participants face an increasing range of regulatory-driven balance sheet and capital pressures when trading with certain market counterparts, which central clearing via a well-capitalised, internationally recognised clearing house can help to alleviate,” says HKEX chief executive, Charles Li.