The Hong Kong Monetary Authority announced optimization arrangements for offshore RMB bond repurchase transactions. 11 primary liquidity providers will act as market makers.

On July 8, the Hong Kong Monetary Authority announced optimization arrangements for offshore renminbi bond repurchase transactions to further facilitate the participation of investors through the "Bond Connect" (Northbound Connect) in offshore renminbi bond repurchase transactions. It is reported that the HKMA announced the launch of offshore renminbi bond repurchase transactions on January 13, and the business officially launched on February 10. As for the market-making arrangements, 11 primary liquidity providers designated by the HKMA will act as market-makers. At least one counterparty in each repurchase transaction must be a market-maker institution. The 11 primary liquidity providers are: 1) Agricultural Bank of China Limited, 2) Bank of China (Hong Kong) Limited, 3) BANKCOMM Limited, 4) BNP Paribas, 5) CITIC Bank International Limited, 6) China Construction Bank Corporation (Asia) Limited, 7) Citibank, 8) Hang Seng Bank Limited, 9) The Hongkong and Shanghai Banking Corporation Limited, 10) Industrial and Commercial Bank of China (Asia) Limited, 11) Standard Chartered Bank (Hong Kong) Limited. The specific optimization measures include: Support for re-using collateral bonds during the repurchase period: Since the launch of offshore renminbi repurchase transactions on February 10, 2025, the market response has been positive. Initially, institutions participating in the business could only use the collateral bonds obtained through offshore repurchase transactions for locking and management in the Central Moneymarkets Unit (CMU) platform and could not reuse them during the repurchase period. Based on the experience gained and market feedback received along with communication with mainland regulatory authorities, this optimization measure will allow collateral bonds to be reused during the repurchase period in accordance with international practices to enhance the efficiency of collateral use, further reduce funding costs for market institutions, and improve liquidity management efficiency. Specifically, collateral bonds in offshore repurchase transactions can be reused during the repurchase period as per the policy requirements, including four usage scenarios: (a) engaging in further offshore repurchase transactions; (b) serving as collateral under the HKMA renminbi liquidity arrangements; (c) serving as performance collateral for the Over-The-Counter Clearing Company in Hong Kong (OTCC); and (d) conducting bond transactions through the "Bond Connect" (Northbound Connect). Participating institutions must follow relevant business rules and operating procedures for reusing collateral in each business scenario (e.g., if collateral is reused in a new offshore repurchase transaction during the repurchase period, it must comply with the latest requirements for offshore renminbi bond repurchase transactions). Support for multi-currency settlements (including Hong Kong dollars, US dollars, and euros): Currently, offshore renminbi repurchase transactions are only settled in renminbi. After this optimization, they can further support multi-currency settlements, including Hong Kong dollars, US dollars, and euros, to enable participating institutions to conduct multi-currency fund transfers based on their actual needs using onshore renminbi bond holdings, enrich liquidity management tools, and enhance the attractiveness of onshore bonds. These two optimization measures aim to align with international market practices, enhance market operation convenience, further expand the depth and breadth of the offshore repurchase market, improve the offshore renminbi liquidity market arrangements, and increase the use of onshore renminbi bonds as collateral in the offshore market. The above optimization measures will officially take effect on August 25, 2025. Latest requirements for offshore renminbi bond repurchase transactions In order to facilitate the smooth introduction of optimization measures, the latest requirements for offshore renminbi bond repurchase transactions, including repurchase transactions using collateral bonds obtained through another repurchase transaction, are as follows: 1. Participants: All existing "Bond Connect" (Northbound Connect) investors (including CMU members and offshore investors who have opened Bond Connect sub-accounts through Hong Kong custodian CMU members). 2. Eligible Bonds: Bonds held by participants under "Bond Connect" (Northbound Connect) and collateral bonds obtained through offshore repurchase transactions, regardless of the type of bond. 3. Market-Making Arrangements: 11 primary liquidity providers designated by the HKMA will act as market-makers. At least one counterparty in each repurchase transaction must be a market-maker institution. 4. Trading and Settlement Arrangements: (a) Master Agreements: Institutions can choose the repurchase agreement text themselves (e.g., Global Master Repurchase Agreement (GMRA) or the National Association of Financial Market Institutional Investors' (NAFMII) bond repurchase transaction master agreement). (b) Trading Methods: Transactions can be conducted through: - Over-the-counter bilateral trading; - Using the "Bond Connect" (Northbound Connect) trading method, through interfacing domestic and foreign infrastructures; - Through foreign electronic trading platforms; or through domestic electronic trading platforms. (c) Settlement Arrangements: To be completed under the CMU's repurchase services. Settlement currencies include renminbi, Hong Kong dollars, US dollars, and euros. 5. Information Data Reporting: Market-makers must report transaction data to the HKMA on the same day of the repurchase transaction for market surveillance purposes. The HKMA will further communicate the requirements and methods for information reporting with market-makers. Operational details regarding bond transfer and settlement arrangements will be announced by CMU later. The HKMA will continue to closely monitor market conditions to ensure stable and orderly market operations, and will communicate with the industry to review further optimization measures in a timely manner to support the steady and robust development of offshore renminbi business.