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Pilot platform for cross-border investment and settlement of debt securities

The following is issued on behalf of the Hong Kong Monetary Authority:

     The Hong Kong Monetary Authority (HKMA), Bank Negara Malaysia (BNM) and Euroclear Bank today (March 13) jointly announced the launching of a pilot platform for cross-border investment and settlement of debt securities (Pilot Platform) that will be operational on March 30, 2012, to enhance cross-border debt securities settlement efficiency and strengthen the capacity for debt securities issuance activities in the Asian region.

     The launch of the Pilot Platform will strengthen the cross-border issuance of, and foreign investment in, local bonds in Hong Kong and Malaysia. Through the Pilot Platform, investors in Hong Kong and Malaysia can buy and hold foreign debt securities and settle cross-border transactions on a Delivery-versus-Payment (DvP) basis whilst local and international bond issuers can issue a wide range of debt securities. The Pilot Platform also includes a comprehensive debt securities database of Asian debt securities maintained by Euroclear Bank.

     The Pilot Platform signifies an important step for Asian bond markets, supported by an international central securities depository (CSD), to collaboratively strengthen post-trade infrastructure. This would facilitate harmonisation of market practices and standardisation of the issuance and settlement of debt securities to deepen Asian bond market liquidity, attract investment and increase operational efficiency.  

     The Pilot Platform entails the optimisation of existing system links between the Central MoneyMarkets Unit (CMU)* of the HKMA, RENTAS** of BNM and Euroclear Bank and the connections between local CSDs and foreign currency real time gross settlement systems in Asia as well as sharing certain Asian CSD services.

     Deputy Chief Executive of the HKMA, Mr Peter Pang, said, "We are pleased to see the Pilot Platform going live. It is a strategic alliance that goes much beyond commercial cooperation and will bring about more significant benefits in fostering global and regional bond market development as well as promoting financial stability in the region.  The HKMA will continue to collaborate with BNM and Euroclear Bank to promote the Pilot Platform to other central banks and securities settlement systems in the region and implement additional services to meet market needs."   

     Deputy Governor of BNM, Mr Muhammad Ibrahim, said, "Bank Negara Malaysia has been collaborating with central banks in the region on the platform for the settlement and depository of debt securities and sukuks. The roll out of the Pilot Platform provides investors and market intermediaries an efficient and cost-effective cross-border access to the bond markets in Malaysia and Hong Kong. This marks a major milestone for regional financial integration, and a step towards a unified bond market platform across Asia. As we expect ongoing growth of emerging East Asian markets, the implementation of the Pilot Platform would indeed be an important step towards sustaining growth and development in the region."

     Managing Director and Head of Business Development for the Euroclear group, Mr Anso Thirˆm, said, "Euroclear Bank has supported the initiative from the beginning and is very happy to work closely with our Asian colleagues to deliver practical ways of further improving the bond market infrastructure in Asia. Euroclear Bank has strong ties with the Asia-Pacific region, having operated with offices in the region since the 1980s. We value the trust that the HKMA and BNM have placed with us to partner them as they embark on a multi-faceted programme of regional post-trade improvements. We look forward to working with other Asian markets on their settlement, collateral management and corporate action processing challenges."

* CMU is the debt securities clearing, settlement and custodian system in Hong Kong operated by the HKMA.

** RENTAS comprises a real-time gross settlement system used primarily for high-value interbank payments and a debt securities settlement and depository system in Malaysia. It is owned by BNM and operated by BNM's wholly-owned subsidiary, Malaysian Electronic Clearing Corporation Sdn. Bhd.

Background information

     In 2008, a group of central banks and CSDs in the Asian region, and Euroclear Bank formed a Task Force with the aim to develop a cost-effective and efficient cross-border investment and settlement infrastructure for debt securities to facilitate the Asian bond market development and enhance the attractiveness of Asian debt securities to foreign investors.

     The Task Force has reached consensus that a Common Platform Model is necessary for achieving its planned objectives. A gradual implementation approach is considered appropriate for Asia given the differences in regulatory and currency regimes among Asian markets. The Task Force issued a White Paper in June 2010, recommending the development of a Common Platform Model in the long run and the introduction of a Pilot Platform in the initial phase as a tactical solution to improve the cross-border investment and settlement infrastructure for debt securities in Asia.  The HKMA, BNM and Euroclear Bank decided to join the Pilot Platform as early movers when the platform is launched to set a precedent for other economies and maintain the momentum for a gradual migration towards a fully-fledged Common Platform Model.

Ends/Tuesday, March 13, 2012
Issued at HKT 17:27


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