The Hong Kong Monetary Authority (HKMA) and Euroclear announced their agreement to develop a direct link between the HKMA’s Central Moneymarkets Unit (CMU) and the Brussels-based international central securities depository. This fully-automated, real-time link will enable investors in Hong Kong and other parts of Asia to directly hold and settle Euroclear-eligible debt securities via their CMU accounts.
Scheduled to go live by the end of 2002, the new connection will significantly improve the ability of Asian investors to access international securities and counterparties in a secure, DVP (delivery-versus-payment) environment.
In 1994, an indirect one-way link was established from Euroclear to the CMU, enabling Euroclear clients to clear and settle debt securities lodged with the CMU. This link, provided through HSBC, continues to operate very successfully.
As the world’s leading ICSD, Euroclear operates an extensive global network with links to 32 domestic markets and offers settlement and related services in 43 currencies. The new link will help to promote efficient, cost-effective and low-risk cross-border securities transactions. This in turn will attract more investment activities to Hong Kong and enable Asian investors to better manage their liquidity.
Commenting on the agreement, Joseph Yam, Chief Executive of the HKMA, said: “Although the CMU is already one of the most advanced CSDs in Asia, we cannot afford to stand still. Investors and issuers in the bond markets increasingly require a global reach. And they have come to expect continual improvements in clearing and settlement arrangements so as to increase efficiency, reduce costs and contain risk. This enhancement of the excellent relationship we already have with Euroclear is a significant step in the development of efficient and safe debt trading in the region, and should be especially convenient to those managing global portfolios from or through Hong Kong.”
Pierre Francotte, Chief Executive Officer, Euroclear Bank, added: “We warmly welcome the HKMA’s decision to establish a direct link with Euroclear. As well as underscoring Euroclear’s commitment to providing high-quality and cost-effective custody and settlement services to the Asian market, the link will also provide direct and immediate benefits to clients of both organisations. Asian investors will be able to settleEuroclear-eligible securities in their own time-zones, while clients in non-Asian markets will be able to access an even broader range of trading counterparties.”