HKEX to Introduce 5-year China Ministry of Finance Treasury Bond Futures

Products

24 Mar 2017

	Offshore markets’ first futures on domestic Chinese government bonds
	HKEX’s first Mainland-related interest rate derivatives
	Important addition to risk management tools offered by HKEX

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

HKATS Code	HTF
Underlying Bond	Onshore 5-year China Ministry of Finance Treasury Bonds with 3% coupon rate and annual coupon payment
Contract Size	RMB500,000
Contract Months	The two nearest quarter months (quarter months are Mar, Jun, Sep and Dec)
Price Quotation	As a percentage of the Contract Size, quoted to 3 decimal places
Minimum Fluctuation	0.002 percent of the Contract Size, which is equivalent to RMB10
Trading Hours (Hong Kong time	9:00 am - 12:00 noon (morning trading session) and 1:00 pm - 4:30 pm (afternoon trading session)
Settlement Method	Cash settled contract for difference
Settlement Currency	RMB
Last Trading Day	The Second Friday of the Contract Month
Final Settlement Price	Onshore 5-year China MOF T-Bond basket reference price provided by China Central Depository & Clearing Co Ltd at approximately 6:00 pm on the Last Trading Day

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:

Issued by the China Ministry of Finance;

RMB denominated;

Tradable in China interbank bond market;

With fixed coupon rates annually; and

With the remaining term to maturity of no less than four years (including the 4th year) and no more than seven years (excluding the 7th year) as of the Last Trading Day of the futures contract.

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

Updated 24 Mar 2017