August 24, 2018 / 4:45 AM / 3 months ago

REFILE-China Bond Connect starts delivery vs payment settlement system - source

(Corrects spelling of the word ‘participants’ in the 2nd paragraph)

SHANGHAI, Aug 24 (Reuters) - China has implemented a delivery versus payment (DVP) settlement system for transactions through its Bond Connect scheme, cleared through China Central Depository and Clearing Co (CCDC), a source with direct knowledge of the matter told Reuters.

The clearing house, China’s Cross-Border Interbank Payment System and the Hong Kong Monetary Authority’s Central Moneymarkets unit have informed market participants “that from now on, for any bond settled in China Bond, they will be using the new settlement method, which is real time delivery versus payment,” the source said.

Under this settlement, payment for bonds is due at the time of delivery, which will effectively reduce settlement risk.

The lack of DVP settlement has been seen as a major hurdle for the wider use of Bond Connect by offshore investors.

China’s Bond Connect scheme, launched in July 2017, permits eligible institutional investors in Hong Kong and overseas to buy and sell onshore bonds without a quota. (Reporting by Andrew Galbraith, Editing by Sherry Jacob-Phillips)

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