70 | Financial and Monetary Affairs
which was launched in 1996, has a single-tier settlement structure, with all banks maintaining settlement accounts with 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 (EFBNs) for intraday repurchase agreements with the HKMA.
The US dollar, euro and renminbi RTGS systems which started operating in 2000, 2003 and 2007 respectively allows real-time settlement of transactions in the abovementioned currencies, thereby reducing or eliminating settlement risk caused by time gap. Thanks to the interface between the RTGS systems, Hong Kong dollar/US dollar/euro/renminbi foreign exchange transactions can be settled on a payment-versus-payment (PvP) basis.
The Central MoneyMarkets Unit (CMU) Service, established in 1990, is operated by the HKMA to provide a clearing and custodian system for EFBNs and other private debt securities. 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 to enable overseas investors to trade CMU securities. It has also established links with a number of regional central securities depositories.
Through its integration with the RTGS systems in Hong Kong, the CMU enables members to settle securities on a delivery-versus-payment (DvP) basis, thereby enhancing settlement efficiency and eliminating settlement risk. The interface also enables automatic intraday repurchase agreements to provide intraday liquidity to participants in the RTGS systems.
The Clearing and Settlement Systems Ordinance, which became effective in November 2004, empowers the Monetary Authority to designate and oversee clearing and settlement systems that are material to the monetary or financial stability of Hong Kong or to the functioning of Hong Kong as an international financial centre. Five clearing and settlement systems the CMU, the Hong Kong dollar Clearing House Automated Transfer System (CHATS), the Continuous Linked Settlement System, the US dollar CHATS and euro CHATS - have been designated. Each system was issued a certificate of finality, which provides statutory backing to the finality of settlement for transactions made through the system. The HKMA has found all designated systems to be continuously in compliance with the ordinance.
Hong Kong Monetary Authority
The HKMA was set up on April 1, 1993 after the Legislative Council passed amendments to the Exchange Fund Ordinance in 1992 empowering the Financial Secretary to appoint a Monetary Authority.
Its policy objectives are to maintain currency stability within the framework of the Linked Exchange Rate system through sound management of the Exchange Fund, monetary policy operations and other means deemed necessary; as well as to promote safety and stability of the banking system through the regulation of banking business, the business of taking deposits and the supervision of Als, and to promote