OCBC joins HKEX’S OTC Clear as demand for HKD and CNH derivatives grow
This is to meet increasing demand for hedging products. Total volume of HKD and CNH cross-currency swaps transacted in 1H2023 was more than 50% higher year-on-year.
Singapore, 21 September 2023 – OCBC today announced that its headquarters in Singapore has joined OTC Clearing Hong Kong Limited (OTC Clear), a subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), as a direct clearing member.
OTC Clear, as the first and only global clearing house to offer a clearing service for USD/HKD and USD/CNH cross currency swaps (CCS), has seen volumes in these currency pairs pick up significantly in the financial year 2022. In the first half of 2023, OCBC’s CCS volumes in HKD and CNH currencies have increased by more than 50% compared to the same period a year ago, driven by demand from its trading activities and customers. Strong interest was seen particularly from OCBC’s Singapore and Hong Kong SAR customers.
This direct clearing membership is in line with the Bank’s corporate strategy, where ASEAN-Greater China is a key pillar. Membership gives OCBC access to clearing services for over-the-counter (OTC) derivatives in CCS and interest rate swaps (IRS) for HKD and CNH. Central clearing for these derivatives will lower costs and mitigate counterparty risks. OTC Clear is the only central clearing party licensed by Monetary Authority of Singapore (MAS) that can accept banks incorporated in mainland China, as well as Chinese banks in Hong Kong SAR as direct clearing members. OCBC, as a direct clearing member, will benefit by being able to access more Chinese banks as counterparties.
As a direct clearing member of OTC Clear, OCBC can participate in Swap Connect, which launched its Northbound channel in May 2023. Swap Connect gives Hong Kong SAR and international investors access to mainland China's onshore interbank interest rate swap market. This is especially important for investors who may want to hedge risks arising from their participation in China’s bond market.
Mr Kenneth Lai, OCBC’s Head of Global Markets, said: “We are pleased to become a direct clearing member of OTC Clear. In addition to cost savings and mitigating our counterparty risk, membership with OTC Clear provides OCBC access to the China onshore interest rate swap market through Swap Connect. With deeper liquidity and less volatility in the onshore market, we are able to help our customers manage their risks more effectively.”
Ms Glenda So, HKEX Group Head of Emerging Business and FIC, said: “We warmly welcome OCBC as the newest member of OTC Clear. This is another sign of the vibrancy of the regional derivatives market and follows the much anticipated launch of Swap Connect earlier this year, which continues to meet the growing appetite from global and regional banks and investors for RMB derivatives risk management and trading. We are extremely encouraged to see key industry participants, such as OCBC, recognise the unique clearing opportunities that OTC Clear offers through its comprehensive RMB-focused OTC derivatives capabilities, including Swap Connect, cross currency and interest rate swaps, non-deliverable interest rate swaps and deliverable FX, and we look forward to welcoming more participants in the future.”