(Adds details and background)
BEIJING, April 28 (Reuters) - China's central bank on
Friday issued guidance on the interest rate Swap Connect scheme
between Hong Kong and mainland China, which will take immediate
effect.
The move marks another step in the opening up of China's
capital markets as it will allow foreign investors to access
onshore interest rate derivatives and manage and hedge their
China exposure.
Qualified foreign investors can participate in northbound
domestic interbank financial derivatives trading, the People's
Bank of China (PBOC) said in a written statement.
The guideline was meant to regulate interest rate swap
businesses between Hong Kong and mainland China, to "protect the
legitimate rights and interests of domestic and foreign
investors, and maintain the order of the interest rate swap
market," the PBOC said.
The central bank added that regulators would study extending
the scheme's southbound leg, which allows mainland investors to
access the Hong Kong financial derivatives market, in due
course.
Initially, interest rate swap products will be eligible
under the northbound scheme, and quotation, trading and
settlement will be denominated in yuan.
The new scheme set the initial net daily trading quota for
North Bound Connect at 20 billion yuan ($2.9 billion), and the
quota may be adjusted based on market conditions in future,
according to the statement.
Swap Connect was first announced by regulators last July
2022 and was initially supposed to be launched six months after
that.
($1 = 6.9155 Chinese yuan)
(Reporting by Ella Cao and Meg Shen; Editing by Kevin Liffey
and Hugh Lawson)
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