Exclusive: Hong Kong exchange, Tradeweb in talks over 'Bond Connect' platform

HONG KONG (Reuters) - The Hong Kong exchange is in talks with Tradeweb, a fixed income trading platform, to connect China’s $7.5 trillion bond market with overseas investors, three sources with direct knowledge of the discussions told Reuters.

One of the sources said the talks on the creation of the so-called Bond Connect were exclusive and advanced.

“We are in the final stages of finalizing the plan, and the discussions are now at the revenue-sharing stage,” said the source, who is involved in the negotiations.

Tradeweb, majority-owned by Thomson Reuters, the parent company of Reuters News, matches buyers and sellers of fixed income products across more than 22 international OTC bond markets.

“Tradeweb does not comment on market speculation,” a London-based Tradeweb spokeswoman said.

Thomson Reuters declined to comment.

A spokesman for Hong Kong Exchanges & Clearing (HKEX) declined to comment, but at the exchange’s interim results last week CEO Charles Li said the company was proceeding with “Bond Connect” and planned to discuss the project with regulators.

HKEX 0388.HK said more than a year ago that it planned to build a Bond Connect scheme similar to the landmark Hong Kong-Shanghai Connect program launched in November 2014, which allows foreign investors to trade Shanghai shares from Hong Kong and Chinese investors to trade Hong Kong shares from Shanghai.

The initiatives form part of HKEX’s published strategic plan to act as a gateway between international investors and China, which restricts foreign investment and operates capital controls.

Bond Connect would help further open up China’s onshore bond market, which was the world’s third largest after the United States’ and Japan’s, with 48.5 trillion yuan ($7.5 trillion) of outstanding bonds at the end of 2015, according to ratings agency Moody’s.

Reporting by Saikat Chatterjee Michelle Price and Umesh Desai; Editing by Will Waterman