HSBC China first foreign bank to offer futures margin depository service

27 November 2013   Category: News, Asia, China, Hong Kong   By Asia Asset Management

HSBC Bank (China) Company Limited has received a license from the China Financial Futures Exchange (CFFEX) to become a futures margin depository bank (FMDB). HSBC China will be the first foreign bank in mainland China to offer futures margin depository services to Qualified Foreign Institutional Investors (QFIIs), providing clients with greater convenience and efficiency in trading index futures.

Andy Ng, head of HSBC Securities Services in China, said: “We are delighted to be licensed to launch this service which will help us better meet our clients’ increasingly sophisticated needs. An increasing number of QFIIs and RQFIIs (Renminbi Qualified Foreign Institutional Investors) are trading index futures and have a growing need for margin depository and clearing services. This license allows us to further enhance our services for QFIIs and RQFIIs, helping them simplify the procedure for trading index futures, increase efficiency in clearing and lower the risks in margin management and deposit outflows. HSBC is committed to providing clients a complete asset servicing solution in China and is actively developing new services to satisfy client needs as they enter new investments.”

Under CFFEX’s regulations, margins for futures trading among investors, futures brokers and exchanges are required to be deposited and cleared through a FMDB. In January 2013, the first batch of QFIIs started trading index futures, and CFFEX introduced administrative measures in August for the QFIIs’ custodian banks to apply for licenses to provide margin depository services. HSBC China was the first foreign bank in mainland China to apply for and subsequently receive the license.

HSBC has recorded a number of “firsts” in servicing foreign institutional investors in addition to obtaining this FMDB license. It was the first custodian bank to service foreign investors investing in the B-share market; one of the first custodian and clearing banks for QFIIs; the first foreign custodian bank for RQFIIs; the first foreign bank to trade and clear bond transactions for clients in China’s interbank bond market; the first custodian bank to assist QFIIs in entering the interbank market in China; and one of the first custodian banks to help QFIIs trade index futures.

As of October 2013, HSBC China was the custodian bank for US$15.9 billion of investment quota for QFIIs, which was equivalent to 34.4% of the total amount approved, the largest market share among all banks. It was custodian bank for 49.6 billion RMB (US$8.14 billion) investment quota for RQFIIs, which was equivalent to 37.2% of the total amount approved.