Hong Kong Exchanges and Clearing Limited (HKEx) today officially welcomed 12 financial institutions that will join OTC Clearing Hong Kong Limited (OTC Clear), a clearing house HKEx established for the purpose of providing clearing services for over-the-counter (OTC) derivatives, as founding shareholders. This brings the business one step closer to the planned commencement of operations in first half of 2013, subject to the final approval of the Securities and Futures Commission (SFC).
The financial institutions are Agricultural Bank of China Limited, Hong Kong Branch, Bank of China (Hong Kong) Limited, Bank of Communications Co., Ltd. Hong Kong Branch, The Bank of East Asia Limited, CCB International Securities Limited, Citibank, N.A., Deutsche Bank AG, The Hongkong and Shanghai Banking Corporation Limited, Industrial and Commercial Bank of China (Asia) Limited, J.P. Morgan, Standard Chartered Bank (Hong Kong) Limited and one other financial institution which is in the final stage of obtaining formal internal approval. As of today's date, the financial institutions have either signed or will sign a formal subscription agreement with HKEx and OTC Clear to join OTC Clear as "non-voting ordinary shareholders", with rights to receive dividends, appoint directors to the board and nominate representatives to the clearing house's User Committee. It is expected that all the financial institutions will enter into the subscription agreement within this month.
Upon completion of the transaction, which is expected to take place shortly after the SFC has granted formal recognition to OTC Clear as a recognised clearing house, each of the founding shareholders will take up 100 non-voting ordinary shares. The financial institutions will together hold 25 per cent of the total issued share capital of OTC Clear and HKEx will hold 75 per cent. HKEx will continue to hold 100 per cent of the voting ordinary shares of OTC Clear.
The financial institutions represent a cross-section of financial institutions with local, Mainland Chinese and international interests. HKEx believes that this will provide OTC Clear with a good foundation upon which to build its OTC derivatives clearing business in the region.
OTC Clear is designed to capitalise on Hong Kong's unique advantage as the premier offshore renminbi (RMB) centre through the clearing of deliverable and non-deliverable RMB-denominated OTC derivatives.
"OTC Clear is part of our much broader plan to diversify our business and capitalise on new growth opportunities, particularly those related to China and the internationalisation of the RMB," said HKEx Chief Executive Charles Li. "Global regulatory changes are resulting in more OTC trades being cleared by central counterparties, and we are excited that our founding shareholders will join hands with us to capture this opportunity."
Extending HKEx's clearing franchise to the OTC market will underpin HKEx's long-term strategy to become a vertically and horizontally integrated global exchange group offering multiple asset classes.