Linklaters and its Chinese joint operation partner Zhao Sheng Law Firm advised the HKEX on the Swap Connect scheme, providing global investors with initial access to mainland China’s interbank financial derivatives market via Hong Kong to hedge interest-rate risks in Chinese bond holdings.
The new scheme – supported by the People’s Bank of China, the Hong Kong Securities and Futures Commission and the Hong Kong Monetay Authority – took effect on 16 May on the HKEX, and marks the extension of financial interconnection between mainland China and Hong Kong to derivatives.
The scheme’s initial phase starts with northbound trading, allowing global investors easy access to mainland China’s renminbi interest-rate swap market through trading, clearing and settlement arrangements between approved institutions in Hong Kong and mainland China.
John Lee, the chief executive of Hong Kong, said the new measure would further unlock the potential of foreign investors to invest in the mainland capital markets and strengthen Hong Kong’s position as the world’s largest offshore renminbi business centre and international risk management hub.
Both law firms advised on the design, drafting of documentation for, and the regulatory and legal issues on the establishment of Swap Connect. Linklaters acted as international counsel, while Zhao Sheng acted as PRC counsel to the HKEX.
Partner and Asia head of structured finance and derivatives Liew Chin Chong led the Linklaters team, with support from structured finance and derivatives partner Karen Lam.