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Moneymarket service launches new functions
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The Hong Kong Monetary Authority (HKMA) announced that the Central Moneymarkets Unit (CMU) Service, the central custodian and clearing system for debt securities would shortly be introducing two new functions. The new functions are delivery vs payment (DVP) for private sector debt instruments and the clearing of debt securities denominated in foreign currencies.
The announcement was made by the Chief Executive of HKMA, Mr Joseph Yam, in his presentation at the Seminar on Global Payment Systems today (Friday).
He said: "DvP facility would help reduce settlement risk in the trading of securities lodged and cleared with the CMU,"
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He further commented: "So far the CMU only accepts Hong Kong dollar denominated debt securities because the CMU Service is designed and set up to promote the Hong Kong dollar debt market.
"It is a logical step for CMU Service to widen its coverage to debt securities denominated in foreign currency."
At present, the CMU Service only offers Free of Payment (FOP) facility in securities transfer without handling cash settlement. By offering the DvP facility, the settlement risk can be eliminated when delivery of securities only take place when there are good funds available to settle the transaction.
The DVP facility will be operative on December 18.
A spokesman from HKMA said: "As part of our efforts to improve the robustness of our debt securities clearing system and the interbank payment system, we will be able to offer DVP function on a real time basis when we go live on the Real Time Gross Settlement (RTGS) in December 1996.
"The end-of-day DvP facility will be part of the interim measures to reduce settlement risk in debt securities transaction prior to December 1996."
To meet international standards and minimise settlement risks, Hong Kong is moving towards a Real Time Gross Settlement System (RTGS) from the existing next day settlement system. The implementation has made good progress so far according to the project schedule agreed by the Committee on Payment System.
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