Financial and Monetary Affairs 79
the HKMA. All RTGS payment transactions are settled in real time across the books of the HKMA. Intraday liquidity can be obtained by the banks through the use of their Exchange Fund Bills and Notes for intraday repurchase (repo) agreements with the HKMA.
Leveraging on the experience with the Hong Kong dollar RTGS system, the HKMA introduced the US dollar RTGS system in August 2000. The system allows participants to settle US dollar transactions real-time in the Asian time zone, thereby reducing or eliminating foreign exchange settlement risk caused by any time gap. Since its full implementation, the system has been operating smoothly and has attracted an increasing number of participants. As at December 2004, there were 68 direct participants and 164 indirect participants. Among the indirect participants, 119 were from overseas. Turnover of the system grew to 5 000 transactions per day with a total value of over US$5.5 billion.
With a view to further enhancing the financial infrastructure in Hong Kong, the HKMA launched a euro RTGS system in April 2003. Similar to the technology used for the Hong Kong dollar and US dollar RTGS systems, the euro RTGS system is built on the same infrastructure and offers a range of advanced and sophisticated clearing functions. The key functions include the real-time gross settlement for euro payments and for payment versus payment (PvP) between euro and US dollar or euro and Hong Kong dollar foreign exchange transactions. The system also maintains a seamless interface with the Central Moneymarkets Unit (CMU) to cater to the delivery versus payment (DvP) of euro denominated debt securities and repo facilities. At the end of 2004, there were 23 direct participants and 21 indirect participants, of which 11 were outside Hong Kong. In 2004, the euro RTGS system registered an average turnover of EUR923 million on a daily basis.
The CMU Service, established in 1990, is operated by the HKMA to provide a clearing and custodian system for Exchange Fund Bills and Notes, as well as private sector debt issues. There are 172 CMU members, most of which are financial institutions in Hong Kong. At year-end, there were 1 326 issues with a total value of $237.2 billion equivalent lodged with the CMU. The CMU system accepts both Hong Kong dollar and foreign currency denominated debt instruments. It has been fully integrated with interbank payment systems, and is linked up with international central securities depositories like Euroclear and Clearstream to enable overseas investors to trade CMU securities. It also has established links with the regional central securities depositories in Australia, New Zealand and the Republic of Korea.
Through a seamless interface with the US dollar and euro RTGS systems, the CMU enables members to settle US dollar and Euro securities on a DVP basis, thereby enhancing settlement efficiency and eliminating settlement risk. The interface also enables automatic intraday repo to provide intraday liquidity to participants of the US dollar and euro RTGS systems.
To further eliminate settlement risks, the HKMA facilitated inclusion of the Hong Kong dollar into the Continuous Linked Settlement (CLS) System in December 2004, providing an additional channel to settle foreign exchange transactions in a safe and