Hong Kong Securities and Futures Commission Leung Chung Yin: Actively cooperating with the mainland to explore feasible mechanisms to facilitate investors' participation in mainland derivative products.

On November 19, Leung Chun-ying, Executive Director of the Market Surveillance Department of the Securities and Futures Commission of Hong Kong, stated at the Derivatives Trading Hong Kong Forum organized by the International Swaps and Derivatives Association that the Commission is closely cooperating with the mainland authorities and HKEX to further develop Hong Kong into an offshore risk management hub. The Commission has started exploring the Southbound Swap Link, allowing mainland investors to use Hong Kong's swap market to expand their risk management toolbox. Given the strong demand from global investors to trade on mainland exchanges for a wider range of asset classes, the Commission is actively working with mainland authorities to explore feasible mechanisms to facilitate direct investment in mainland related derivative products. These measures are expected to further promote cross-border capital flows and solidify Hong Kong's strategic role as a gateway to the mainland. According to Leung Chun-ying, the growth momentum of the Swap Link since its introduction has been impressive, with trading volume reaching about 10% of the turnover in the mainland interest rate swap market. As of September, the total turnover has exceeded 8.5 trillion RMB, with a daily turnover of 14.7 billion RMB. To sustain this momentum, the Commission has optimized the Swap Link this year by extending the maximum term of Northbound Swap Contracts and introducing swap contracts with reference to the mainland loan market quoted interest rates to enrich the product offerings. The Commission has also increased the daily trading quota to more than double to 45 billion RMB. He mentioned that since the introduction of relevant regulatory frameworks by the Commission in 2014, the OTC derivatives market in Hong Kong has rapidly developed. Today, Hong Kong has become a hub for investors to manage their investment exposures and risks in Asia. According to data from the Hong Kong Central Clearing System (HKCC), the nominal value of off-exchange equity holdings in Asia amounts to 800 billion US dollars, with an increase of about 70% over three years. Most of the off-exchange equity derivative holdings cover Asian securities outside of Hong Kong, with about one-third tracking stocks listed in Hong Kong and the remaining two-thirds involving securities in other Asian markets including Mainland China A-shares, Taiwan, Japan, and South Korea. Stocks from the US and Europe account for a small portion. With its role as a super connector and expanding connectivity mechanisms with the mainland, Hong Kong has now become the world's largest off-exchange market for mainland asset-related derivatives, with rapid growth mainly driven by RMB foreign exchange and interest rate derivative products, as well as equity derivative products tracking mainland companies. The latest triennial survey by the Bank for International Settlements in 2025 shows a 65% increase in average daily trading volume of RMB foreign exchange in Hong Kong and a 67% increase in average daily trading volume of RMB interest rate derivatives during the survey period. Data from the HKCC also shows a 60% increase in open positions of stock derivative products tracking mainland-related securities. Leung Chun-ying stated that the off-exchange equity derivative market for locally listed securities in Hong Kong has reached a size of 250 billion US dollars, doubling in the past three years, in line with a 40% growth in exchange-traded derivative markets and a 30% growth in the stock market. Currently, the combined off-exchange and exchange-traded derivatives markets account for 12% of the free float market value of Hong Kong stocks, reflecting the steady enhancement of Hong Kong's position as a risk management hub in Asia. The open positions of off-exchange derivative products cover over 2,000 stocks and exchange-traded funds, as well as major benchmark indices tracking stocks listed in Hong Kong, covering the majority of Hong Kong's listed securities, with around 80% related to stocks and 20% to indices.