Liang Fengyi: Currently, it is a good opportunity for Hong Kong to promote the development roadmap of the FIC market. Three measures are crucial.

The Chief Executive of the Hong Kong Securities and Futures Commission, Ashley Alder, attended the Fixed Income and Currency Summit and Bond Connect Forum, stating that the global macro environment is undergoing profound changes. There is a growing demand in the market for diversified asset allocation and Renminbi assets, making it an opportune time for Hong Kong to promote the development of the Fixed Income and Currency (FIC) market. Alder mentioned three key measures under the roadmap to promote the FIC market, including trading platforms, fixed income collateral, and risk management. She noted that Renminbi assets are becoming an effective option in non-dollar asset allocation. As of the end of April 2026, overseas investors held over 3 trillion RMB in onshore Renminbi bonds. Additionally, the Bond Connect northbound trading has steadily increased, reaching a monthly trading volume of 1.2 trillion RMB and a daily average trading volume of 556 billion RMB, both setting new records. Regarding the FIC trading platform, the People's Bank of China recently announced that China Foreign Exchange Trading System (CFETS) will collaborate with the Hong Kong Exchanges and Clearing Limited (00388) to develop a new electronic Fixed Income and Currency trading platform. This new platform will not replace existing platforms but provide a new choice for the market. It aims to strengthen Hong Kong's role as a bridge between onshore and offshore markets, particularly in the trading, liquidity management, and risk management of offshore Renminbi fixed income products, offering more differentiated services. Alder emphasized the need for further development of Hong Kong's repo market to enhance secondary market liquidity. Introducing repo clearing through central counterparties will be a crucial component of a robust and stable FIC ecosystem. She also announced the second measure of expanding the types of fixed income instruments accepted as eligible collateral by the clearinghouses. Specifically, the People's Bank of China has allowed overseas investors to hold onshore Chinese government bonds and policy bank bonds through Bond Connect as collateral for the Hong Kong Futures Clearing Corporation and the Hong Kong Securities Clearing Company Limited. Alder pointed out that this new measure will further enhance the attractiveness of Renminbi assets by expanding their use cases. Since early 2025, Chinese government bonds held through Bond Connect have been accepted as margin collateral in over-the-counter trading, with overseas investors submitting a total of 3.9 billion RMB worth of onshore government bonds as margin collateral by early June 2026, accounting for approximately 17% of all margin collateral held by the over-the-counter clearing company. Alder also mentioned that the Securities and Futures Commission has been closely cooperating with the Hong Kong Exchanges and Clearing Limited to promote cross-collateral arrangements and actively studying the feasibility of implementing cross-market margin arrangements between the clearinghouses under HKEX. This move aims to significantly improve capital efficiency without increasing HKEX's risk exposure. Regarding FIC risk management, the People's Bank of China announced that it will optimize the swap line system. The SFC is currently discussing with the People's Bank of China the addition of the Interbank Offered Rate for seven-day deposits (FDR007) as a reference rate in the swap line system. Alder believes this is another step towards introducing more hedging tools for market participants to better manage interest rate risks associated with Renminbi-denominated positions. She also expects the two clearinghouses to jointly launch new contracts in the fourth quarter of this year. As for the five-year offshore Renminbi government bond futures contract, Alder stated that HKEX will officially launch it on August 3, 2026, as a transparent and standardized hedging tool. The SFC will continue to support HKEX in introducing more futures products, including Renminbi-denominated foreign exchange futures and Renminbi-denominated gold futures.