Hong Kong Exchanges and Clearing Limited (HKEX) is pleased to announce that its central counterparty subsidiary, OTC Clearing Hong Kong Limited (OTC Clear), has received approval to offer client clearing services to banks in Japan, opening up a new region of opportunity for the provider of over-the-counter derivatives clearing and settlement services.
OTC Clear has received a license from the Financial Services Agency of Japan to become a Foreign Financial Instruments Clearing Organisation, allowing it to offer clearing services to Japanese banks, which have shown strong demand in clearing cross currency swaps with OTC Clear. When clearing cross currency swaps with HKEX, banks could significantly reduce their capital costs.
“Japanese institutions play an important role in the OTC derivatives market, and this addition demonstrates our commitment to expand our fixed-income and currency business offering in the region and internationally,” said Calvin Tai, HKEX Co-President and Chief Operating Officer. “This great milestone reflects further recognition of OTC Clear by international regulators.”
Apart from Japan, OTC Clear is also recognised by authorities in the US, European Union, and Australia to offer clearing services to their financial institutions.
Separately, OTC Clear also welcomes Barclays Bank PLC as its Clearing Member and 6th European Clearing Member.
Mr Tai added: “We are pleased to have Barclays join OTC Clear as a direct Clearing Member, leveraging our unique clearing solutions in the offshore renminbi, or CNH. As a global market leader in the Asian Time Zone, we help connect Mainland Chinese banks to the global markets.”
“We are delighted to be a direct clearing member of HKEX’s OTC Clear,” said Kelvin Sze, Barclays’ Head of Macro Trading, Hong Kong. “OTC Clear has been a significant industry development with its well-established network of members. As one of the founding shareholders, we are looking forward to facilitating greater access for our counterparties in the region with this additional clearing channel to meet their offshore renminbi needs.”
OTC Clear was set up in 2013 to provide OTC derivatives central clearing services. The central counterparty marked another record-breaking year in 2019, with total clearing volumes rising more than 60 per cent to US$196 billion, while it recorded a 45 per cent growth in cross currency swaps clearing volume to US$66 billion.
Hong Kong Exchanges and Clearing Limited (HKEX) is one of the world’s major exchange groups, and operates a range of equity, commodity, fixed income and currency markets. HKEX is the world’s leading IPO market and as Hong Kong’s only securities and derivatives exchange and sole operator of its clearing houses, it is uniquely placed to offer regional and international investors access to Asia’s most vibrant markets.
HKEX is also the global leader in metals trading, through its wholly owned subsidiaries, The London Metal Exchange (LME) and LME Clear Limited. This commodity franchise was further enhanced with the launch of Qianhai Mercantile Exchange, in China, in 2018.
HKEX launched the pioneering Shanghai-Hong Kong Stock Connect programme in 2014, further expanded with the launch of Shenzhen Connect in 2016, and the launch of Bond Connect in 2017.