There are two distinct clearing and settlement systems in Hong Kong, China: the Central Money Markets Unit (CMU) of the Hong Kong Monetary Authority (HKMA); and the Central Clearing and Settlement System (CCASS) and Derivatives Clearing and Settlement System (DCASS) of the Hong Kong Exchanges and Clearing (HKEx).

CMU and RTGS

The CMU is a central securities depository unit operated by HKMA that provides electronic clearing, settlement, and custodian services for Hong Kong dollar-debt instruments. The implementation of the Real Time Gross Settlement (RTGS) System provides real-time, Delivery-versus-Payment (DvP) service for all debt securities transactions. HKMA has also developed a US dollar- clearing system linked to the CMU. The CMU has a two-way link with Euroclear and Clearstream, and comprises market makers, members, and registered bond dealers.

In April 2004, a cross-border debt securities settlement agreement between the CMU of HKMA and the Government Securities Book-Entry System of China Government Depository Trust & Clearing Co. Ltd (CDC) was reached. The one-way link allows authorized CDC members to settle and hold Hong Kong dollar and foreign debt securities with the CMU.

CCASS and DCASS

CCASS provides clearing, settlement, and depository services for exchange-traded securities. Clearing and settlement is conducted using a Continuous Net Settlement (CNS), or trade-by-trade system. Where CNS is used, funds are settled on a delivery-versus-payment (DVP) basis. All cash and share transactions on the exchange go through CCASS.

DCASS is an integrated clearing and settlement system for all HKEx options and futures contracts.

Payments Settlement

Settlement is primarily made through Hong Kong Interbank Clearing (HKICL), which provides interbank clearing and settlement services to all banks in Hong Kong, China. HKICL is a private company jointly owned by HKMA and the Hong Kong Association of Banks.

The Government’s Clearing and Settlement System Ordinance established a statutory regime for HKMA to designate and oversee clearing and settlement systems. The ordinance also provides statutory backing to HKMA’s oversight of important clearing and settlement systems, and legal certainty for settlement finality. The Clearing and Settlement System Ordinance took effect in November 2004.