Clifford Chance

Clifford Chance advises financial Institutions on participation in Hong Kong's first OTC derivatives clearing house

Hong Kong: Leading international law firm Clifford Chance has advised a consortium of 11 financial institutions including Agricultural Bank of China Limited, Hong Kong Branch, Bank of China (Hong Kong) Limited, Bank of Communications Co., Ltd. Hong Kong Branch, The Bank of East Asia Limited, CCB International Securities Limited, Citibank, N.A., Deutsche Bank AG, The Hongkong and Shanghai Banking Corporation Limited, Industrial and Commercial Bank of China (Asia) Limited, J.P. Morgan, Standard Chartered Bank (Hong Kong) Limited, on their respective investment as founding shareholders of OTC Clearing Hong Kong Limited (OTC Clear), a clearing house established by the Hong Kong Exchanges and Clearing Limited (HKEX) for the purpose of providing clearing services for over-the-counter (OTC) derivatives.

The subscription agreement entitles each member to subscribe for the same number of non-voting ordinary shares with rights to dividends, to appoint directors to the board and to nominate representatives to the clearing house's User Committee. The 12 financial institutions that will be the founding shareholders in OTC Clear will hold in aggregate 25 per cent of the total issued share capital of OTC Clear with HKEX holding the remaining 75 per cent of share capital and 100 per cent of the voting shares.

"We're pleased to have advised the consortium on its investment and participation in OTC Clear. The participation by a broad mix of international and local financial institutions reflects the strong support amongst the financial community for Hong Kong's first OTC derivatives clearing house," said Corporate partner Neeraj Budhwani.

Paget Dare Bryan, Asia Pacific Head of Derivatives adds, "OTC derivatives clearing is at the top of every regulator's agenda with the G20 derivatives reform commitments starting to take effect across the leading international markets. With the establishment of OTC Clear, Hong Kong leads the way on its OTC derivatives reform agenda and solidifies its claim to be the premier offshore RMB centre."

Paget provided advise on clearing and regulatory issues and was supported by senior associate Terry Yang. Neeraj led the team on the corporate and transactional aspects of this deal and was assisted by senior associates Isaac Stewart and Christina Hui.