As the "Northbound Swap Connect," a mechanism for RMB interest rate swap transactions, celebrates its first anniversary, the optimized functionality of the "Northbound Swap Connect" has been successfully launched. CIB actively participated in the preparation for the optimization of the "Northbound Swap Connect" mechanism, contributing to the implementation of the optimized functions. On the first day of the launch, CIB completed multiple interest rate swap transactions with the International Monetary Market (IMM) settlement date as the payment cycle, contributing to the cross-border integration of the derivatives market and the deepening of high-level financial openness.
"Northbound Swap Connect," also known as "Swap Connect," officially launched on May 15, 2023, is the collaboration between the Hong Kong and Mainland China interest rate swap markets. The optimized functions include new interest rate swap contracts with IMM settlement dates as the payment cycle, contract compression services, and supporting historical start date contracts.
With the support of the highly liquid interbank market in China, "Swap Connect" utilizes a comprehensive electronic trading system, front-to-back connectivity, and a centralized clearing mechanism, facilitating the participation of foreign institutions in the RMB interest rate swap market. This broadens and deepens the domestic interest rate derivatives market, stimulates foreign institutions' enthusiasm to participate in the RMB interest rate swap market, and encourages the conversion of offshore non-deliverable interest rate swap (NDIRS) transactions to the "Northbound Swap Connect" platform. This adds trillions in development potential to the domestic interest rate swap market, further enhancing the pricing power and influence of the RMB derivatives market. By the end of April, the "Northbound Swap Connect" had completed over 3,600 RMB interest rate swap transactions, with a total notional principal amount of nearly 1.8 trillion RMB, becoming a new driving force for the opening of the interest rate market.
Since the launch of the "Northbound Swap Connect," CIB, as one of the first quoting institutions, has actively collaborated with the China Foreign Exchange Trade System (CFETS) to implement various optimization mechanisms and continuously build a cross-border connectivity service platform. CIB has provided comprehensive quotation services covering all product types and maturities to over 30 overseas institutions, including products linked to FR007 and Shibor_3M, continually meeting the trading needs of overseas customers, effectively improving the hedging efficiency of foreign institutions, and optimizing the cross-border investment environment.
"Moving forward, CIB will continue to support the infrastructure development and transaction mechanism optimization of 'Northbound Swap Connect,' leveraging our strengths as a 'comprehensive financial market operator' and 'comprehensive financial market service provider.' We will expand our coverage of overseas institutions, actively capture trading demands, and provide high-quality quotations and comprehensive financial services for all product types and maturities. This will promote the diversification of domestic derivatives market participants, enhance the efficiency of interest rate benchmark curve pricing, and better serve the overall strategic layout of the country's opening up," said a representative from CIB's Fund Operation Center.