The Hong Kong Monetary Authority (HKMA) is to introduce a new clearing, settlement and custodian service for US treasuries, and has appointed Citibank as custodian, on behalf of HKMA's Central Moneymarkets Unit.
The new service, scheduled to go live in the fourth quarter of 2002, will enable investors in Hong Kong and other parts of Asia to settle US treasuries during Hong Kong hours through the CMU.
As custodian, Citibank will provide an indirect link to the Fedwire Book-Entry Securities Transfer System, a clearing and settlement system for US treasuries operated by the Federal Reserve Bank of New York in the United States. Citibank will also be responsible for providing settlement, income collection, redemption and tax-related services to the CMU.
With the existing system interface between the CMU and the US dollar clearing system in Hong Kong, investors can clear and settle US treasuries on a real-time delivery versus payment (DvP) basis during Hong Kong hours through the accounts maintained by CMU members with the CMU. This arrangement will bring forward the DvP settlement of the US treasuries from New York to Hong Kong time and shorten the settlement cycle, say the companies.
Tony Latter, deputy chief executive of the HKMA, says: "This new service from the CMU is part of the on-going effort of the HKMA to provide a robust, efficient and up-to-date financial infrastructure to serve the investor community in Asia. Hopefully this new service will attract more business to Hong Kong and strengthen its role in securities settlement in the region."