Hong Kong Exchanges and Clearing (0388) said on Friday that its wholly-owned subsidiaries and on-exchange derivatives clearing houses, HKFE Clearing Corporation (HKCC) and the SEHK Options Clearing House(SEOCH), will begin accepting China Government Bonds and Policy Bank Bonds held through Northbound Bond Connect, as well as offshore bonds issued by the Ministry of Finance of the People's Republic of China (MOF Bonds), as eligible non-cash collateral to cover margin requirements from November, subject to regulatory approval.
The expansion of eligible non-cash collateral will apply to margin requirements for products cleared by HKCC and SEOCH, providing market participants with broader collateral choices and more efficient use of capital, HKEX said.
This enhancement marks an important step forward in broadening the use of Chinese Government Bonds in Hong Kong, said Vanessa Lau, chief operating officer of HKEX.
"By expanding the range of assets that can be used to meet margin requirements, HKEX is committed to supporting greater flexibility in collateral management, enhancing capital efficiency for market participants and contributing to the continued development of Hong Kong's fixed-income and yuan ecosystem," Lau added.
The planned enhancement follows the announcement by the Securities and Futures Commission, the Hong Kong Monetary Authority and the People's Bank of China on July 7 regarding the acceptance of Bond Connect Securities as eligible collateral for Hong Kong's derivatives market.
