OTC Clear Launches Clearing Services for HONIA-based Interest Rate Products

Market Operations
09 Jul 2020

Hong Kong Exchanges and Clearing Limited (HKEX) is pleased to announce today (Thursday) that its central counterparty (CCP) subsidiary, OTC Clearing Hong Kong Limited (OTC Clear), has become the first clearing house to offer clearing services of Hong Kong Dollar Interest Rate Swap (IRS) contracts benchmarked to the Hong Kong Dollar Overnight Index Average (HONIA) reference rate.

This first centrally cleared HONIA IRS contract was between Bank of China (Hong Kong) Limited (BOCHK) and the Hongkong and Shanghai Banking Corp.  HONIA is the alternative reference rate to the Hong Kong Interbank Offered Rate (HIBOR).

Calvin Tai, Co-President and Chief Operating Officer, HKEX, said: “We are very excited to be providing clearing services to the Hong Kong dollar risk-free rate swap, as we support the development of the HONIA-based derivatives market and promote HONIA’s adoption in the financial industry.  OTC Clear will continue its work on providing a paced transition to new risk-free reference rates for clearing members.”

Tony Wang, General Manager, Global Markets, BOCHK, said: “As one of the major international financial centres, Hong Kong is carrying forward the IBOR reform with other major financial centres. The launch of HONIA further enhances the reliability of interest rate benchmarks. BOCHK is very pleased to have participated in the first Hong Kong Dollar HONIA IRS transaction settled by OTC Clear, and looks forward to the introduction of more HONIA-based products in the market to promote the development of the financial markets in Hong Kong.”

Justin Chan, Head of Greater China, Asia Pacific, Global Markets, HSBC, said: “HSBC welcomes the launch of clearing services for HONIA-based interest rate products by OTC Clear, which represents a major development of Hong Kong’s derivatives market. As a key industry player in the city, HSBC will continue to actively support the gradual market adoption of HONIA and enrich the suite of HONIA products for other market participants.

The Treasury Markets Association last year identified HONIA as the alternative reference rate to HIBOR, as part of an interest rate benchmark reform.  The Hong Kong Monetary Authority has been encouraging more HONIA-based products be introduced in the market. There is, however, no current plans for HIBOR to be decommissioned.  To support the development of the HONIA market, OTC Clear has developed a proxy methodology that simulates a HONIA curve, helping to provide greater transparency to market participants.  Such services will be available to the market in late July.

With the key US dollar interest rate benchmark, the London Interbank Offered Rates (LIBOR), set to be decommissioned after end-2021, regulators globally have been working to adopt new interest rate benchmarks.  OTC Clear has introduced clearing services for swaps linked to the euro short-term rate and the secured overnight financing rate, to help facilitate clearing members in their transition to alternative reference rates.

OTC Clear provides clearing and settlement services for over-the-counter derivative transactions. The launch of HONIA-based products enriches OTC Clear’s Hong Kong dollar IRS product suite, as well as to facilitate the adoption of HONIA swaps in the derivative markets.

For further details on OTC Clear’s IRS products, please refer to the HKEX website.



About HKEX

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 (QME), 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.




Updated 09 Jul 2020