Shanghai Clearing House Boosts Credit Derivatives for Green and TLAC-Linked Bonds
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Green Bond-Linked Credit Derivatives
On September 2, Guotai Haitong Securities and Southwest Securities completed a credit derivative transaction linked to carbon-neutral bonds, with Shanghai Clearing House providing bilateral clearing services. This initiative expands green finance offerings and advances China’s dual-carbon strategy.
Linking derivatives to carbon-neutral bonds enhances price discovery, risk management, and asset allocation. Banks and securities firms increasingly use credit derivatives for credit substitution and hedging, optimizing bond portfolios. Shanghai Clearing House provides full lifecycle services—cash flow calculation, settlement, credit event management, valuation, and counterparty risk management—fully online, improving efficiency and transparency.
Guotai Haitong leverages professional expertise to drive innovation and broaden market participation. Southwest Securities, focused on western China, explores localized applications to support regional economic development, including the Chengdu-Chongqing corridor.
Bond-Linked Credit Derivatives
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Earlier, on August 20, CICC and Shenwan Hongyuan executed the interbank market's first credit derivative linked to TLAC non-capital bonds, with Shanghai Clearing House providing bilateral clearing. This represents a further innovation in underlying asset types and market applications.
These derivatives improve price discovery, risk management, and credit release, boosting primary issuance efficiency and secondary market liquidity while reinforcing systemic bank resilience. The interbank market now covers negotiable certificates of deposit, financial bonds, Panda bonds, Sci-Tech bonds, green bonds, and corporate debt instruments. CCP clearing mechanisms reduce counterparty risk, release credit lines, and enhance liquidity, supporting market innovation and operational efficiency.
Looking Ahead
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Shanghai Clearing House is set to expand credit derivative products and refine clearing mechanisms, supporting institutions in managing risk more effectively. These efforts improve bond market pricing, facilitate green and innovative financing, and enhance market efficiency, positioning China’s interbank credit derivatives market as an increasingly relevant platform for global investors and financial professionals.
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