US clearing system in full working phase

The final interface of the US dollar RTGS system and the Central Moneymarkets Unit completes Hong Kongs US dollar clearing system.

By Monday, 18 December, the US dollar cheque clearing system will be fully implemented, witháthe interface between the US dollar real-time gross settlement (RTGS) and the Central Moneymarkets Unit (CMU) complete.

This means that customers in Hong Kong will be able to open US dollar current accounts in Hong Kong and have cheques drawn from that account settled on the day following presentation of the cheque. This two-day settlement cycle compares witháa two-week average cycle for US dollar cheques drawn upon banks in the US.

The new US dollar RTGS and CMU interface enables the real-time and end-of-day delivery versus payment settlement of US dollar denominated debt securities deposited in the CMU. The CMU is a debt securities clearing and custodianásystem. Furthermore, the interface will enable the automatic intraday repo to ensure that participating banks have sufficient intraday liquidity.

"With the US dollar RTGS/CMU interface in place, the settlement risk associated with the trading of the US dollar denominated debt securities deposited in the CMU will be eliminated," says Joseph Yam, chief executive of the Hong Kong Monetary Authority (HKMA).á"CMU will become even more attractive to both local and overseas investors and issuers. The US dollar cheque clearing service will provide greater convenience to retail customers in making US dollar payments," he adds.

This last stage of implementation completes a three-part process where, in the first stage, the US dollar RTGS system was put into place, and in the second phase, payment versus payment (PvP) settlement for foreign exchange transactions between US dollar and Hong Kong dollar was enabled.

Currently,áan average of 2000 transactions totalling some $3 billion are settled daily through the system. The PvP turnover has increasedáfrom $700 million when it was first introduced, to approximately $1.5 billion recently. This indicates the preference of Hong Kong banks to have US dollar/HK dollar foreign exchange transactions settled on aáPvP basis to eliminate foreign exchange risk.

There are 62 direct participants and 59 indirect currently in the system. HSBC is the settlement institution.

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