July 21, 2016 / 9:20 AM / 3 years ago

Hong Kong exchange approved to clear USD/CNH cross currency swaps

HONG KONG, July 21 (Reuters) - The Hong Kong Exchanges & Clearing Limited said on Thursday it had received regulatory approval to provide clearing for cross currency swaps (CCS) and it plans to launch the service in August.

OTC Clearing Hong Kong Limited (OTC Clear), a subsidiary of the Hong Kong bourse, will initially provide clearing for swaps in the USD/CNH currency pair, the HKEx said in a statement on its website.

It will be the first international clearing house to provide clearing for USD/CNH CCS.

The CCS are traded actively in Hong Kong, where they are often used by issuers of offshore yuan bonds, also known as dim sum bonds, to swap proceeds into another currency.

“This launch is an important milestone for HKEx and OTC Clear that illustrates our ambitions in FIC (fixed income and currency) and our opportunities as the RMB becomes a more international currency,” said HKEx chief executive Charles Li.

OTC Clear provides a Payment versus Payment - or PvP - settlement solution through the Real-Time Gross Settlement system operated by the Hong Kong Monetary Authority, which eliminates settlement risk.

There has been a growing push by the HKEx to diversify its revenue streams due to weak stock markets. Chinese stocks are among the worst performing in Asia this year.

The HKEx and Thomson Reuters in June launched a series of renminbi indexes which measure the intraday performance of the yuan against a basket of currencies. The bourse also planned to introduce more yuan currency futures and options. (Reporting by Michelle Chen; Editing by Jacqueline Wong)

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