HKEX’s OTC Clear Clears First HONIA-based Interest Rate Swaps

Source: Regulation Asia Manesh Samtani, Regulation Asia 2020-07-10

The first centrally cleared HONIA interest rate swap contract was between BOCHK and HSBC, marking a significant step to promote HONIA’s adoption in the financial industry.

HKEX (Hong Kong Exchanges and Clearing) has announced the launch of the first clearing services of HKD interest rate swap contracts benchmarked to HONIA, the alternative reference rate to HIBOR.

The TMA (Treasury Markets Association) identified HONIA as the alternative reference rate to HIBOR last year. The HKMA (Hong Kong Monetary Authority) has since encouraged banks to introduce more HONIA-based products.

Hong Kong will adopt a multi-rate approach, where an enhanced HIBOR will co-exist alongside HONIA.

> ALSO READ: HKMA Survey Highlights LIBOR Transition Challenges (24 Apr 2020)

The new HONIA swap clearing service is offered by HKEX subsidiary OTC Clear. The first centrally cleared HONIA interest rate swap contract was carried out between BOCHK and HSBC, marking a significant step to develop the HONIA-based derivatives market and promote HONIA’s adoption in the financial industry.

“OTC Clear will continue its work on providing a paced transition to new risk-free reference rates for clearing members,” said Calvin Tai, Co-President and Chief Operating Officer at HKEX.

To support the further development of the HONIA market, OTC Clear has developed a proxy methodology that simulates a HONIA curve – to be made available in late July – helping to provide greater transparency to market participants.

OTC Clear has also introduced clearing services for swaps linked to €STR and SOFR, to help facilitate clearing members in their transition to alternative reference rates.

HKEX

HKEX’s OTC Clear Clears First HONIA-based Interest Rate Swaps

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