PvP

1
Annex
Benefits of a US Dollar Clearing System

• Enhance Hong Kongs financial infrastructure
• help to develop the markets in US dollar
  denominated equities and debt securities in Hong
  Kong
• attract US dollar denominated trades in the
  Region to settle in Hong Kong
• Enhance settlement efficiency and reduce
  settlement risk
• PvP link with Hong Kong dollar
• DvP for US dollar denominated securities
• US dollar paper cheque clearing facilities

2
Contractual Framework
HKMA
Appoints HSBC to be the settlement institution
for a franchise period of 5 years
HSBC
Appoints HKICL as its clearing agent during the
franchise period
HKICL
3
Settlement Structure
Settlement Institution
HSBC
PB
PB
PB
PB
IP
IP
IP
IP
IP
IP
IP
IP
IP
IP
IP
IP
PB Participating Bank IP Indirect
Participants
4
Clearing Facilities

• US dollar RTGS - US dollar payment settled in
  real-time across the book of the settlement
  institution will be final and irrevocable.
• US dollar cheque clearing - US dollar cheques
  settled on a next day and multilateral netting
  basis.
• PvP settlement for Hong Kong dollar / US dollar
  foreign exchange transactions through linkages
  with the Hong Kong dollar clearing system.
• DvP settlement for US dollar denominated debt
  securities and shares through linkages with
  respective clearing houses, e.g. CCASS and CMU.

5
Implementation Timetable
? CHATS with overdraft facilities but without
August 2000 CMUP interface ? ECG clearing
for CCASS items August 2000 ? Payment vs.
Payment September 2000 ? Paper cheque
clearing December 2000 ? CMUP interface
December 2000