HKEX derivatives clearing houses take China government and policy bank bonds as margin, cut fee to 0.15%

Hong Kong’s two exchange-traded derivatives clearing houses began accepting Chinese government bonds as margin collateral on 2 Nov. HKFE Clearing Corporation (HKCC), which clears Hong Kong Futures Exchange contracts, and the SEHK Options Clearing House (SEOCH), which clears derivatives traded on the Stock Exchange of Hong Kong, now take two kinds of bond:

• Ministry of Finance (MOF) Bonds: bonds issued by China’s Ministry of Finance and offered mainly in the international market.
• Bond Connect Securities: bonds traded in the China Interbank Bond Market, issued by the Ministry of Finance or a policy bank and offered mainly in the domestic market, held through Northbound Bond Connect. HKCC’s amended rules define a policy bank as any institution the State Council designates as one, including China Development Bank, the Export-Import Bank of China and the Agricultural Development Bank of China.

Policy bank bonds are eligible only in their onshore, Bond Connect form; the offshore MOF Bonds are sovereign issues.

On the same day, both clearing houses cut the accommodation fee on all non-cash collateral, not only the Chinese bonds, from 0.25% to 0.15% a year. The fee is charged on the value of collateral used to meet margin requirements, after haircuts.

HKCC and SEOCH first announced the plan in circulars dated 25 Sep (PT/SCS/066/2026 and PT/SCS/067/2026), the day of HKEX’s announcement. Those circulars set a target of November 2026, subject to regulatory approval, and said operational arrangements and eligibility requirements would follow in a separate circular. The launch circulars of 16 Oct (PT/SCS/069/2026 and PT/SCS/070/2026) refer back to them, say the SFC has approved the rule amendments, fix the 2 Nov start and set out the limits, haircuts, account types and fee.

In a statement on 2 Nov the SFC said the move is one of the short-term initiatives in its strategic action plan. It is also part of measures the People’s Bank of China announced in July 2026 to support Hong Kong’s fixed income and currency market.

Limits and haircuts

The two 16 Oct circulars set out identical risk controls from launch:

• Non-cash cap: non-cash collateral can still cover no more than 50% of a clearing participant’s margin requirement, and the Chinese bonds count towards that limit.
• Concentration limits per participant: RMB282m for MOF Bonds, RMB1bn for Bond Connect Securities issued by the Ministry of Finance, and RMB1bn for those issued by policy banks.
• Haircuts by remaining maturity:

Remaining maturity	MOF Bonds	Bond Connect Securities
Under 1 year	0.50%	0.50%
1 to under 3 years	0.70%	0.50%
3 to under 5 years	0.70%	0.80%
5 to under 10 years	4.30%	2.40%
10 years and over	14.00%	12.50%

An FX haircut applies on top. Collateral subject to specific wrong-way risk “will generally not be accepted”, which can include securities issued by the participant or its affiliates. The clearing houses may revise the limits and haircuts by circular.

How it works

The bonds are posted by outright transfer, so beneficial ownership passes to the clearing house. When a client delivers bonds directly, the transfer is treated as if it went from the client to the clearing participant and then from the participant to the clearing house.

Both clearing houses’ 16 Oct circulars set the same account rules. MOF Bonds can be used for house and client position accounts. Bond Connect Securities can be used only for house position accounts, segregated individual client accounts (SICA) and segregated client market maker accounts (SCMMA). HKCC’s rule-amendment circular of the same date says the SICA and SCMMA account types are being introduced with this change. Before posting, participants must complete onboarding and submit the relevant forms; the circulars point to an FAQ produced by HKEX and the Central Moneymarkets Unit (CMU).

Rico Leung, the SFC’s Executive Director of Supervision of Markets, said: “The initiative to further expand the use of CGBs as collateral will not only lower funding costs of market participants but also increase the offshore use case of these bonds.”

Why it matters

Analysis. For futures and options clearing members in Hong Kong, and the international banks and market makers behind them, the change turns renminbi government and policy bank bonds into margin assets alongside cash. Firms holding the bonds through Bond Connect for investment or liquidity reasons can now post them instead of funding cash margin. Cutting the fee on all non-cash collateral from 0.25% to 0.15% lowers the cost of using it.

The constraints are set at participant level. RMB1bn per bond type is modest for a large clearing member, haircuts rise steeply beyond five years, and the 50% non-cash cap is unchanged. Client use of Bond Connect bonds is limited to segregated account types. The change follows other HKEX market structure moves this autumn, including its T+1 plan for the second half of 2028.

What we are watching

• Uptake figures from HKEX, and whether it raises the concentration limits.
• Whether the scheme extends beyond HKCC and SEOCH, and whether the 50% non-cash cap is reviewed.

Sources

• SFC welcomes expanded use of China Government Bonds as margin collateral by HKEX, Securities and Futures Commission, 2 Nov 2026
• HKCC circular PT/SCS/069/2026: Launch of Acceptance of China Government Bonds as Non-Cash Collateral in HKCC, HKFE Clearing Corporation, 16 Oct 2026
• SEOCH circular PT/SCS/070/2026: Launch of Acceptance of China Government Bonds as Non-Cash Collateral in SEOCH, SEHK Options Clearing House, 16 Oct 2026
• HKCC circular LSD/067/2026: Amendments to the HKCC Rules and Clearing House Procedures, HKFE Clearing Corporation, 16 Oct 2026
• HKCC circular PT/SCS/066/2026: Acceptance of China Government Bonds as Non-Cash Collateral in HKCC, HKFE Clearing Corporation, 25 Sep 2026
• SEOCH circular PT/SCS/067/2026: Acceptance of China Government Bonds as Non-Cash Collateral in SEOCH, SEHK Options Clearing House, 25 Sep 2026
• HKEX Derivatives Clearing Houses to Accept China Government Bonds, Policy Bank Bonds and MOF Bonds as Non-Cash Collateral from November 2026, HKEX, 25 Sep 2026