Refinements of the US Dollar Liquidity Facility

Our Ref: M1/31C (24)
22 May 2024
The Chief Executive
All Licensed Banks
Dear Sir/Madam,
Refinements of the US Dollar Liquidity Facility In light of the seven-day repo facility newly added by the US Federal Reserve (Fed) under the Foreign and International Monetary Authorities (FIMA) Repo Facility 1 , the HKMA will introduce refinements of the US Dollar Liquidity Facility (the “Facility”)2 with effect from 24 May 2024 as follows:

1. The settlement date will be the same day as the tender date
   (T+0), instead of the business day after the tender date (T+1).
   In light of this, successful bidders will be required to complete transfer of collateral not later than 6:00 p.m. Hong Kong time on the tender date.
2. The bidding interest rate of the Facility will be subject to a
   minimum rate equivalent to the pricing rate for the seven-day term of the FIMA Repo Facility. Previously, the minimum bidding interest rate was set as the prevailing offering rate of the overnight FIMA Repo Facility. 1 For details, please refer to the Fed’s website:
   https://www.federalreserve.gov/monetarypolicy/fima-repo-facility.htm 2 In principle, the Facility is underpinned by the Fed’s FIMA Repo Facility.

The updated key parameters of the Facility are elaborated in the Annexes. Should you have any questions on the above, please contact the Monetary Operations Division of the HKMA at 2878 8104 or USDfacility@hkma.iclnet.hk. Yours faithfully, Daryl Ho Executive Director (Monetary Management) Encl.

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Annex A
Key Parameters of US Dollar Liquidity Facility Tender

1. The HKMA will publish a tender notice on its website at least two
   business days in advance of each tender. The tender notice will include information such as the amount, the tender date, settlement date and repayment date of the US dollar liquidity on offer, taking into account factors such as intervening general holidays in Hong Kong or the US. Normally a tender will be held on a Thursday. If the tender cannot be carried out on a scheduled date, it will be held on the immediately succeeding business day. Term sheet of the tender is at Annex B. Submission
2. All Licensed Banks (LBs) may submit bids from 9:00 a.m. to 12:00 noon
   (both times inclusive) to the Central Moneymarkets Unit (CMU) of the HKMA on the day of a tender. Late submission will not be considered. In each tender each LB may submit only one valid bid. While it is acceptable for an LB to cancel a previously submitted bid and replace it with a new bid, in the case of an LB making multiple bids without cancelling the previously submitted bid(s), only the last bid received by the HKMA before the deadline will be considered whereas all the other previously bid(s) submitted by that LB will be voided.
3. Each submission must be made via a SWIFT message MT599 in a form
   similar to the sample shown in Annex C. As a fall back arrangement, submissions can be transmitted via tested facsimile if needed using the numbers shown in Annex C. LBs should inform CMU in advance if it is foreseen that the fall back arrangement will be triggered. Submitted bids, unless being subsequently cancelled before deadline, will be binding and will not be revocable after deadline (i.e. 12:00 noon on the day of the tender).
4. A valid bid must be at least US$100 million or integral multiples of
   US$100 million. The bid must state the amount of US dollars tendered for and the bidding interest rate, rounded to two decimal places. The bidding interest rate is

subject to a minimum rate as set out in the Summary of Terms of the US Dollar Liquidity Facility on the HKMA website1 . Allotment
5. Allotment will be based on competitiveness of the bids (i.e. in
descending order from the highest to the lowest accepted interest rate). Accepted bids will be allotted at the corresponding bidding interest rates. If total tendered amount is less than or equal to the total amount on offer, all valid bids will be allotted in full.
6. If total tendered amount is larger than the total amount on offer, a special
arrangement will be implemented only in the first round of allotment to ensure the allotted amounts to be widely distributed among the LBs. In the first round, allotment will be based on competitiveness of the bids, with allotment to each LB capped at 25% of the total amount on offer. If the total amount on offer has not been exhausted in the first round, the second round will proceed based on the competitiveness of the bids without any cap to be imposed on any LB. Accepted bids which are at the cut-off interest rate may be allotted in full or in part only. In the case of allotment in part, a calculation will be made of the remaining amount on offer at the cut-off interest rate as a percentage (the “pro-rata percent”) of the total amount applied for at that interest rate level. As far as possible the pro-rata per cent will be applied to the amount tendered for by each LB at the cut-off interest rate and the result rounded down to the nearest multiple of US$1 million.
7. The HKMA reserves the right not to allot the entire amount on offer or
to scale down the allotment to a successful bidder.
8. As soon as practicable after the allotment, the HKMA will notify LBs
whose bids have been successful in whole or in part of their allotments and the required amounts of eligible assets as collateral to be transferred to the HKMA. Eligible assets are specified in the term sheet, while the HKMA will continue to review the need for expanding the scope of eligible assets taking into account experience accumulated going forward. Specifically, the HKMA will request each LB whose bid has been successful to submit a list of available eligible assets. Upon receipt of the list, the

1 https://www.hkma.gov.hk/eng/key-functions/money/liquidity-facility-framework/us-dollar-liquidity￾facility/summary-of-terms/

HKMA will select specific items as collateral, and will inform the LB as soon as practicable. The LB shall make arrangements for transfer of the selected assets as collateral to the HKMA. Allotments are subject to successful transfer of collateral to the HKMA and successful transfer of US dollars from the Federal Reserve to the HKMA through the Federal Reserve’s FIMA Repo Facility.
9. The HKMA will announce on its website the total amount of US dollar
liquidity allotted in the tender and other related details such as the lowest and highest accepted bidding interest rates on the same day of the tender. The names of LBs participating in the tender or those allotted with funds, and individual allotted amounts will not be disclosed. Settlement and repayment
10. US dollar liquidity allotted by tender will be for value on the same day
as the tender date (the “settlement date”). On the settlement date, LBs whose bids have been successful will deliver the agreed nominal value of the selected collateral from their Securities Accounts maintained with the HKMA. The HKMA expects successful transfer of collateral not later than 6:00 p.m. Hong Kong time on the settlement date. Upon confirmation of receipt of collateral, the HKMA will pay US dollars to the LBs’ own bank accounts according to their instructions given to the HKMA. On the repayment date, the LBs shall repay US dollars to the HKMA according to instructions given to them. On the business day after the repayment date, upon confirmation of receipt of US dollars repaid by the LBs, the HKMA will return the collateral to the LBs. Special arrangements
11. If for any reason the tender or the settlement cannot be carried out on a
scheduled date, the affected process will be postponed to the immediately succeeding business day. However, notwithstanding any unforeseen postponement of a tender or its settlement, it is the HKMA’s intention to keep the repayment date originally specified unchanged. If for any reason the repayment cannot be carried out on a scheduled date, the repayment shall be arranged on the immediately succeeding business day. Release of collateral by the HKMA is subject to confirmation of receipt of repayment.

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Annex B
US Dollar Liquidity Facility
Summary of Terms
Important notice: This Summary should be read in conjunction with Circular dated 22 May 2024 and subsequent relevant announcements. Total amount US$10 billion Tenor 7 days 1 Target participants Licensed Banks in Hong Kong 2 Transaction type Repurchase transactions Method Competitive tenders (one valid bid by each participant) Tender hours 09:00 to 12:00 noon Hong Kong Time (both times inclusive) Submission SWIFT MT599 Tender amount Minimum US$100 million, in integral multiples of USD$100 million Interest rate Not lower than the prevailing pricing rate of the seven-day term of the Federal Reserve’s FIMA Repo Facility, rounded to 2 decimal places 3 Allotment Based on competitiveness (i.e. in descending order from the highest to the lowest accepted interest rate), subject to limits to be imposed on HKMA’s sole and absolute discretion to facilitate wide distribution of allotment among participants Collateral Exchange Fund Bills and Notes Haircut Exchange Fund Bills: minimum 2.5% Exchange Fund Notes: minimum 5% plus 1% per year of remaining maturity Settlement Date Same day as Tender Date (T+0) Collateral submission By 18:00 Hong Kong Time on Settlement Date USD payment Within business hours US Eastern Standard Time on Settlement Date Interest payable Referenced to tendered interest rate based on actual/360 convention USD Repayment Principal plus Interest by 10:00 US Eastern Standard Time on Repayment Date Collateral return By 17:00 Hong Kong Time on business day immediately following Repayment Date Penalty HKMA has sole and absolute discretion to impose penalty on failed transfer of collateral or failed repayment Enquires General issues: +852 2878 8104 / USDfacility@hkma.iclnet.hk Settlement issues: +852 2878 8237 or 2878 1778 / settlementsection@hkma.gov.hk Tender submission issues: +852 2878 8146 to 8149 / cmu@hkma.gov.hk

1
May vary due to intervening general holidays in Hong Kong or the US. 2 Must have entered into Master Sale and Repurchase Agreement for Provision of Liquidity Assistance with HKMA. 3 https://www.hkma.gov.hk/eng/key-functions/money/liquidity-facility-framework/us-dollar-liquidity-facility/summary-of-terms/

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Annex C
US Dollar Liquidity Facility
Submission of Tender Application
Licenced Banks shall submit tender applications to the CMU via the following means:
a) SWIFT – MT599
Participants which have not yet established SWIFT’s Relationship Management Application (RMA) with the CMU are required to establish RMA with the CMU SWIFT BIC (HKMAHKHC) prior to sending MT599 message to the CMU. To arrange RMA with the CMU, please submit the SWIFT Registration for CMU Transaction Form (Appendix A.15 in CMU Reference Manual) to the CMU and refer to the SWIFT User Handbook issued by SWIFT for details. The MT599 format specifications are as follows. They shall be strictly followed to ensure smooth processing of application. Message Type: MT599 Receiver BIC: HKMAHKHC Field Field Content & Description Example for new request Example for cancellation :20:
Participant’s transaction reference number
(TRN) MAREPO MAREPOC
:21: TRN of tender bid to be cancelled MAREPO :79: MAUSDREPO:
NEWN for new request
CANC for cancellation
MAUSDREPO:NEWN
MEMCODE:AAAA
BIDRATE:4.2
BIDSIZE:1000
SETBK:BANKBICX
AC 000000001
NAME:David Chan
PHONE:123456789
EMAIL:DavidChan(AT
)email.com
MAUSDREPO:CANC
MEMCODE:AAAA
BIDRATE:4.2
BIDSIZE:1000
SETBK:BANKBICX
AC 000000001
NAME:David Chan
PHONE:123456789
EMAIL:DavidChan(AT
)email.com
MEMCODE: CMU Member Code
BIDRATE: Bid Rate should be in per cent rounded to two decimal points subject to a minimum bid-rate^ BIDSIZE: Bid Size in USD Mn, subject to minimum USD100 Mn and integral multiples of USD100 Mn SETBK: Full details of USD settlement account, including name of corresponding bank, name of final beneficiary (must be own account), bank account number or CHIPS number NAME: Name of contact person PHONE: Phone number of contact person EMAIL: Email of contact person ^ The minimum bid-rate is set out in the Summary of Terms of the US Dollar Liquidity Facility on the HKMA website: https://www.hkma.gov.hk/eng/key-functions/money/liquidity-facility-framework/us￾dollar-liquidity-facility/summary-of-terms/ b) HKMA USD Liquidity Facility Tender Form In case SWIFT message cannot be sent for any reasons, participant should notify the CMU as soon as practicable and submit tender application using the HKMA USD Liquidity Facility Tender Form via facsimile. The form should bear a test number calculated by reference to the Test Keys provided by the HKMA and be sent to the CMU by authenticated facsimile using any of the following numbers:
(852) 2878 1676 or (852) 2878 1677;
Enquiries related to submission of tender application should be directed to the CMU at 852 2878 8146 to 8149 or cmu@hkma.gov.hk.

HKMA USD Liquidity Facility Tender Form (New/Cancel*) To : Hong Kong Monetary Authority Date:
Facsimile: (852) 2878 1676-7
From : ( )
Name of the License Bank Code
We hereby submit/cancel* the following tender for HKMA USD Liquidity Facility. Details of tender are as follows:
Participant’s TRN (max 16 chars) :________________________________ Participant’s TRN (for cancellation only) :________________________________ Bid Rate (Per cent rounded to two decimal points subject to a minimum rate^) Bid Size (in USD Mn subject to minimum USD100 Mn and integral multiples of USD100 Mn) For HKMA use only Allotted size (in USD Mn) ^ The minimum bid-rate is set out in the Summary of Terms of the US Dollar Liquidity Facility on the HKMA website: https://www.hkma.gov.hk/eng/key-functions/money/liquidity-facility-framework/us￾dollar-liquidity-facility/summary-of-terms/. Details of USD settlement account : _____________________________________ (must be own account) _____________________________________ _____________________________________ Contact person : _____________________________________ Telephone : _____________________________________ Email : _____________________________________ Enquiries related to this tender form should be directed to the CMU at (852) 2878 8146 to 8149 or cmu@hkma.gov.hk. IMPORTANT: For fax transmission, please provide Test Number for the total tender size tendered for/ to be cancelled*.

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