The role of a Central Counterparty (CCP) has evolved into a "stabilizer" and "accelerator" for the high-quality development of financial markets. Shanghai Clearing House will support this development through the construction of its own secure and efficient CCP framework.

Shanghai Clearing House (SHCH), as China's qualified CCP for the interbank market, is committed to implementing the decisions of the Party Central Committee, the State Council, and the People's Bank of China. It will deepen its core business, strictly control risks, uphold integrity while innovating, broaden its openness, and empower the high-quality development of financial markets.

The Central Counterparty as a Stabilizer and Accelerator for Market Development

In recent years, SHCH has focused on serving central bank functions and the development of Shanghai as an international financial center. It has established six major platforms: the world's largest over-the-counter (OTC) foreign exchange central clearing platform, a globally leading platform for RMB asset allocation and risk management, a crucial issuance and custody platform in China, a multi-tiered commodity clearing platform that precisely serves the real economy, the most extensive cross-border connectivity platform, and a distinctive international financial exchange platform. These provide solid infrastructure support for high-quality financial market development. In 2025, SHCH's total clearing volume reached 819 trillion yuan, with CCP clearing accounting for 272 trillion yuan, representing year-on-year growth of 14% and 29%, respectively. This positive trend continued into 2026.

Firstly, its foreign exchange central clearing business ranks first globally, significantly promoting the high-quality development of the interbank forex market. The service covers spot, forward, swap, and option transactions across RMB forex, foreign currency pairs, and foreign currency money markets, supporting over 20 major international currencies and both CCP and bilateral clearing models.

Secondly, clearing services for interest rate, bond, and credit products are rapidly expanding in scale and quality, efficiently supporting RMB asset allocation and risk management. Services include RMB interest rate swaps, standard interest rate swaps, and standard bond forwards for derivatives, along with bond spot, repo, and central bond lending services for the bond market. SHCH also provides CCP clearing for credit derivatives linked to targets like technology innovation bonds and green bonds.

Thirdly, the multi-tiered commodity clearing system is being deepened, effectively empowering the stable development of the OTC commodity market. SHCH has innovatively introduced its CCP clearing expertise into the commodity and carbon emissions sectors. For the spot market, it pioneered the Commodity Clearing Link business model, ensuring secure and efficient Delivery-versus-Payment (DVP) settlement. For the derivatives market, it offers CCP clearing for 22 products across six industries including shipping, energy, chemicals, ferrous metals, and carbon emissions.

Fourthly, its "single point of access" global clearing and custody network is expanding widely, fully serving high-level financial openness and RMB internationalization. In the bond market, it explores a complete cross-border service chain and innovative products like Bond Connect and the Magnolia issuance model. In derivatives, it explores models for overseas participation and pioneered the CCP Connect mechanism ("Swap Connect") with international peers. Internationally, the "Shanghai Clearing Standard" it helped develop has been adopted by mainstream global peers handling over 99% of global business volume.

The CCP Mechanism: A Successful Global Trend and Engine for Innovation

Since 1980, with the rapid growth of global financial derivatives markets, the CCP clearing mechanism has proven effective in containing risk contagion and preventing systemic financial risks. During the 2008 global financial crisis, London Clearing House successfully handled a massive portfolio of interest rate derivatives from Lehman Brothers using only a fraction of the initial margin, preventing losses to other institutions—in stark contrast to the significant losses from Lehman's bilateral cleared exposures.

Post-2008, CCPs have become standard infrastructure in major international financial centers and a crucial engine for innovation. Institutions like LCH, DTCC, ICE Clear Credit, Eurex Clearing, and SGX-DC are emblematic of their respective financial hubs. Statistics from the Bank for International Settlements show that the notional outstanding of OTC derivatives has grown significantly post-crisis, with the proportion centrally cleared for interest rate and credit derivatives rising dramatically from pre-crisis levels to around 77% and 70% respectively today.

In today's globalized finance, CCPs have become a focal point of international financial competition. Countries increasingly view domestic CCP clearing of local currency-denominated products as vital for maintaining monetary sovereignty, ensuring effective monetary policy transmission, and serving macroprudential oversight.

Leveraging CCPs for Macroprudential Management

Globally, macroprudential management increasingly relies on CCPs to mitigate systemic risk. Practices in the UK, EU, and US demonstrate that CCPs can powerfully support macroprudential management across three dimensions: structural optimization, risk prevention, and governance empowerment.

A more orderly clearing network achieves a Pareto improvement in market efficiency. Mechanisms like novation, multilateral netting, and compression reduce overall exposures, margin requirements, and settlement fails. Studies suggest significant potential reductions in dealer exposures and settlement failure rates in markets like US bond repos and Treasuries with CCP clearing.

A more effective risk control system prevents composition fallacies and "herding" effects. As centralized risk managers, CCPs use a layered, waterfall risk management structure and default loss mutualization to lower default probabilities. Standardized default procedures avoid disorderly asset fire sales and price spirals. Empirical evidence from markets like Nordic equities and European repos shows CCPs reduce volatility and act as shock absorbers.

Comprehensive data support enhances macroprudential governance efficacy. As a nexus between regulators and markets, CCPs empower supervision through data integration for穿透式监管 (penetrative supervision), strengthen market discipline through transparent margin and default rules, and smooth market volatility by embedding counter-cyclical logic into margin frameworks, increasing transparency and predictability.

Building a World-Class, Secure, and Efficient Central Counterparty

SHCH outlines four key development directions. First, to become the master registration and custody institution for offshore RMB bond assets. It will expand the Magnolia issuance model, connect with more international custodians, and explore extending the multi-level custody model for Free Trade Zone offshore bonds to serve more international investors.

Second, to become the CCP for offshore RMB financial product trading. It will enrich the supply of RMB CCP clearing products across bonds, rates, and forex, providing offshore investors with risk hedging tools and strengthening RMB product clearing dominance to guard against cross-border risk contagion.

Third, to become the primary central clearing institution for national OTC commodity transactions. It will focus on vital commodity sectors, enriching the Commodity Clearing Link applications and extending financial infrastructure services and technology throughout the commodity and carbon finance industrial chains.

Fourth, to promote a healthy ecosystem for CCP development. This involves deepening the legal and regulatory framework, potentially through dedicated rules for CCP clearing, and exploring the establishment of liquidity risk constraints and support mechanisms, learning from international experience, to enhance liquidity risk management and market stability.

Moving forward, SHCH will, through its own secure and efficient CCP development, better support the price discovery and resource allocation functions of financial markets, continuously enrich market structures, improve depth and breadth, refine the legal and rule system, serve the construction of a macroprudential management framework, and fully support the high-quality development of China's financial markets.