Today the Hong Kong Monetary Authority (HKMA) and Hong Kong Exchanges and Clearing (“HKEX”) announced plans for a wholesale central bank digital currency (wCBDC) trial. The aim is to use the wholesale e-HKD as advance margin for derivatives trading during after hours trading (AHT) sessions.
The HKFE Clearing Corporation Limited (HKCC) has multiple settlement banks. So far one of them, Bank of China Hong Kong, has confirmed it will support HKCC participants that voluntarily choose to take part in the trial. It is likely most of the settlement banks will get involved. HKCC has just 11 participants, but most of them are not banks, meaning they will not be able to hold the e-HKD directly.
“By exploring the use of CBDC, we aim to provide a more flexible and timely payment option outside of regular business hours, and address longstanding operational pain points in the industry,” said Vanessa Lau, COO of HKEX.
The most obvious benefit is delaying cut off times for posting cash for margin. Currently margin must be posted by 3pm to be eligible for usage in AHT sessions, which mainly operate between 5.15pm and 3am. However, the exact time benefit is not entirely clear. In order to use the wCBDC, the settlement bank will likely have to convert money from their central bank reserve account into e-HKD, which also has a time constraint.
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