SHANGHAI (Reuters) – China’s central bank issued draft rules on late Friday seeking public opinions on the “Swap Connect” scheme between mainland China and Hong Kong, marking the latest move to further open up the country’s capital markets.
The new scheme, once launched, will allow mutual access to interest rate swaps trading to promote financial derivatives markets, and also upgraded a separate currency swap agreement.
The trading link would standardize the interest rate swap businesses, and “protect the legitimate rights and interests of domestic and foreign investors, and maintain the order of the interest rate swap market”, the People’s Bank of China said in an online statement.
Interest rate swap (IRS) is a practice in which two parties exchange interest payments through a derivative contract, and the connect scheme would allow overseas investors to hedge their risks when they invest in onshore markets.
Earlier this week, the PBOC said it would deepen the opening up of yuan derivative markets.
(Reporting by Beijing Newsroom; Editing by Alex Richardson)
