To facilitate the development of Swap Connect and cater to the market needs of trading documentation, under the guidance of the People’s Bank of China, the National Association of Financial Market Institutional Investors (“NAFMII”) and Hong Kong Exchanges and Clearing Limited formulated the Swap Connect Cleared Derivatives Agreement（2024 Version）（the “Swap Connect Agreement”）, which was published recently.

Swap Connect innovates a central counterparties link. After onshore and offshore investors execute trade on China Foreign Exchange Trade System (“CFETS”), Shanghai Clearing House (“SHCH”) and OTC Clearing Hong Kong Limited (“OTC Clear”) will jointly provide clearing services. The first launched Northbound Swap Connect provides offshore investors with effective risk hedging tools, which facilitates the offshore investors to manage interest rate risks and promotes the opening-up of the financial market of China.

The Swap Connect Agreement is a bilateral agreement for the execution of Swap Connect transaction and clearing. It is tailored for simplifying the negotiation process and meeting the basic requirements for risk management and compliance of the Northbound Swap Connect trading. By providing both Chinese and English versions, as well as various governing law and dispute resolution options, the Swap Connect Agreement is friendly for both onshore and offshore investors, and can better serve the development of Swap Connect by improving efficiency of documentation.

NAFMII will keep improving documentation services in line with the development of Swap Connect, and facilitating the high-quality development and high-standard opening-up of the financial market of China.

 

Attachment：Key Takeaways