Citi Securities and Fund Services, a division of global transaction services, says it will provide third-party clearing services for Knight Equity Markets Hong Kong, a unit of US-based Knight Capital Group, on Hong Kong Stock Exchanges and Clearing (HKEx).

The announcement follows Knight's recent approval as an exchange participant on HKEx and its entrance into the Asia-Pacific region.

Knight's Hong Kong office offers sales and trading in Asian equities to the firm's institutional clients worldwide. Under the agreement, Citi will provide equities third-party clearing services for Knight including trade capture, transaction creation, reconciliation and SWIFT reporting. Knight will have access to CitiDirect for Securities, Citi's web-based client delivery platform which provides reporting, transaction, market information and corporate action information on a real-time basis.

Third-party clearing is for exchange members that don't want to run their own back-office infrastructure.

Citi says these services will enable Knight to reduce fixed costs, benefit from enhanced operational efficiencies and receive extensive settlement capabilities on both on-exchange and off-exchange flows.

Citi will also provide Knight with securities custody and clearing services across 13 countries in Asia-Pacific.

Knight Capital provides market access and trade execution services across multiple asset classes to buy- and sell-side clients. The firm provides trading and market-making in global equities, including more than 19,000 US equities, and provides execution services in fixed income, foreign exchange, futures and options.

Knight's implementation of Citi's third-party clearing solution in Hong Kong follows HKEx's announcement in 2007 regarding the introduction of a third-party clearing framework in its securities market, allowing exchange participants direct access to the market by appointing a third-party provider to handle clearing and settlement functions.

Leveraging its experience in other international and regional markets, including Australia, Citi became the first provider to offer third-party clearing capabilities to clients in Hong Kong in 2008.