BNY Mellon Triparty Now Accepts Chinese Bonds as Collateral

Rhea-AI Summary

BNY Mellon has introduced a solution allowing international investors to use Chinese fixed income assets as collateral on its triparty platform via Hong Kong's Bond Connect. This development addresses the previous lack of mechanisms to collateralize these assets, facilitating access to the $13.9 trillion China Interbank Bond Market. The first successful trade involved collateralizing Chinese government securities. BNY Mellon's move is expected to enhance the global collateral landscape, reflecting the growing importance of the Chinese market in the investment ecosystem.

Positive

• Introduction of a solution enabling the use of Chinese bonds as collateral.
• Addresses demand for collateralization in the growing Chinese fixed income market.
• Facilitates access to the $13.9 trillion China Interbank Bond Market.
• First successful trade executed using the new collateral solution.

Negative

• None.

HONG KONG, April 12, 2021 /PRNewswire/ -- Investors are now able to better utilize their Chinese fixed income assets following the introduction of the bonds as eligible collateral on BNY Mellon's triparty platform through Hong Kong's Bond Connect.

Bond Connect allows international investors to access the $13.9 trillion China Interbank Bond Market (CIBM) through a market infrastructure linkage in Hong Kong. BNY Mellon's new solution enables clients to utilize these assets as collateral. Once the assets are within our triparty platform, clients can mobilize and optimize the securities as collateral in transactions with counterparties across the globe.

Until now, there has been no mechanism to allow participants to use Bond Connect assets as collateral, however, with the Chinese fixed income market only expected to grow, demand has been mounting for such a solution.

BNY Mellon triparty solves this problem, enabling investors to use Chinese bonds as collateral for a variety of purposes. Further, the platform is entirely custody agnostic meaning that clients are able to utilize BNY Mellon as triparty agent without custodying assets at the firm.

In the first trade, which printed last week, a broker-dealer client was able to collateralize Chinese government securities through BNY Mellon's triparty solution. Under the transaction, BNY Mellon accessed the client's bonds, which were under custody at HSBC, and reflected the assets in BNY Mellon triparty, enabling the client to use the collateral for financing and other purposes.

"Enabling clients to collateralize Chinese bonds through triparty is a service that has the potential to revolutionize the global collateral landscape," says Natalie Wallder, Asia Pacific Head of Clearance & Collateral Management at BNY Mellon. "China is a hugely important market and one that will only become more integral to investors in the years ahead. Having the ability to utilize Chinese stocks, and now bonds, as collateral promises to be transformative for clients." 

"Supporting a solution enabling clients to utilize a triparty agent such as BNY Mellon for assets not held within their custody chain will have significant utility," says Nigel Rangel, Senior Product Manager for Banks and Broker Dealers within Markets and Securities Services at HSBC. "Bond Connect was the first market in which this was achieved and we anticipate this will have practical applications in other markets."

BNY Mellon's Bond Connect solution follows in the wake of our Stock Connect product, a similarly groundbreaking collateralization service for Chinese stocks. Launched in early 2018, BNY Mellon's triparty solution for Stock Connect enables clients outside of mainland China to collateralize A-shares traded on the Shanghai and Shenzhen Stock Exchanges through triparty in Hong Kong. Since the launch of the service, BNY Mellon's Stock Connect solution has become an important element in the global collateral ecosystem for institutional investors across the world.

ABOUT BNY MELLON
BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment and wealth management and investment services in 35 countries. As of Dec. 31, 2020, BNY Mellon had $41.1 trillion in assets under custody and/or administration, and $2.2 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com. Follow us on Twitter @BNYMellon or visit our newsroom at www.bnymellon.com/newsroom for the latest company news.

Contact:       

Peter Madigan
peter.madigan@bnymellon.com  
+1 212 815 2308        

Nina Truman  
nina.truman@bnymellon.com  
+1 212 815 2006

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SOURCE BNY Mellon

FAQ

What is BNY Mellon's new solution for using Chinese bonds as collateral?

BNY Mellon's new solution allows international investors to use Chinese fixed income assets as collateral on its triparty platform via Hong Kong's Bond Connect.

When was the first trade executed using BNY Mellon's triparty solution?

The first trade using BNY Mellon's triparty solution for collateralizing Chinese bonds was executed recently before the April 12, 2021 announcement.

How does BNY Mellon's solution impact the Chinese bond market?

The solution enhances access and usability of the $13.9 trillion China Interbank Bond Market, allowing for increased global participation.

What significance does the Bond Connect have for investors?

Bond Connect provides international investors the opportunity to access Chinese bonds, and BNY Mellon's solution allows these bonds to be used as collateral for various financial transactions.