This circular informs the recipient of the currency conversion activities that their bank may undertake under Swap Connect, which is an arrangement that enables overseas and Mainland investors to participate in the financial derivatives markets in the Mainland and Hong Kong. In the initial stage, Northbound Trading will commence first, allowing overseas investors to participate in the Mainland interbank financial derivatives market through mutual access between Hong Kong and Mainland infrastructure institutions in respect of trading, clearing and settlement. The requirements for the designated settlement banks in Hong Kong that offer the CNY conversion service are outlined, including proper internal controls, monitoring the eligibility of investors, and ensuring the genuineness and reasonableness of the CNY spot transactions. The Hong Kong FX Settlement Banks are required to submit monthly reports to the HKMA and may start providing the CNY conversion service after they have the necessary control and system in place to discharge the requirements.
Frequently Asked Questions in Relation to
the Currency Conversion Arrangement under Swap Connect: https://www.hkma.gov.hk/media/eng/doc/key-information/guidelines-and-circular/2023/20230428e1a1.pdf