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Offshore markets’ first futures on domestic Chinese government bonds
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HKEX’s first Mainland-related interest rate derivatives
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Important addition to risk management tools offered by HKEX
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Hong Kong Exchanges and Clearing Limited (HKEX) will introduce 5-year China Ministry of Finance Treasury Bond (MOF T-Bond) Futures on Monday, 10 April 2017.
HKEX’s MOF T-Bond Futures will be the offshore markets’ first futures on domestic Chinese government bonds.
HKEX is introducing the new futures to meet international investors’ growing demand for tools to manage RMB interest rate risk in anticipation of the further development and opening of the Mainland’s bond market.
MOF T-Bond Futures will be traded in Renminbi (RMB), with prices determined by the Mainland’s China Central Depository and Clearing Co Ltd, or ChinaBond, according to methodology and procedures from HKEX. Price determination details are in the Appendix along with the contract specifications. The table below has key features of MOF T-Bond Futures.
HKEX has invited Futures Exchange Participants (FEPs) to apply to serve as liquidity providers for MOF T-Bond Futures, and it is planning a joint promotion programme with FEPs, which will include sponsorship of marketing activities and support for product promotion.
Key Features of MOF T-Bond Futures to be Introduced on 10 April 2017
Appendix
Bond Basket and Pricing Determination
China Central Depository & Clearing Co, Ltd (ChinaBond) shall, in accordance with the procedures and methodologies provided by the Futures Exchange*, determine the bond universe, bond basket and calculate the Daily Reference Price of each bond basket for each futures contract.
The date of basket determination is defined as five working days before the listing date of the futures contract. Bonds in the bond universe shall fulfil the following conditions:
- Tradable in China interbank bond market;
ChinaBond selects bonds from the bond universe to construct the bond basket. The bonds selected as the bond basket constituents must be in the three most liquid issues based on ChinaBond’s Relative Liquidity Measure (as defined in the methodology) as of the date of basket construction. ChinaBond will calculate and send the Daily Reference Price of the bond basket and MOF T-Bond Futures to the Futures Exchange on each working day from the listing day till the Last Trading Day. Please refer to HKEX’s website for further details of the bond basket and reference price calculation methodology.
* Hong Kong Futures Exchange Limited, a wholly-owned subsidiary of HKEX.
Details of the contract specifications are in a circular on the HKEX website.
Ends