CME Group Announces the Launch of New Yuan FX Futures Contracts

Offshore Yuan trading is certainly becoming a hot topic lately. With many estimates that the Chinese government will slowly further

Offshore Yuan trading is certainly becoming a hot topic lately. With many estimates that the Chinese government will slowly further loosen up the band for Yuan exchange rate many banks and brokers are becoming involved with various Yuan trading options. This opens way for both hedging and speculating.

Oמ April 1st, 2011 Chinese State Administration of Foreign Exchange (SAFE) has allowed Yuan options trading. OANDA is the only known broker to allow spot Yuan trading. You can read an overview of these services here. Lately I interviewed Richard Olsen, co-founder of OANDA, with regard to various Yuan related issues. Richard believes that amongst other things that the Yuan is bound to appreciate over 100% once freely floated.

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Today we have the following announcement from CME:

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SINGAPORE, July 10, 2011 /PRNewswire/ — CME Group, the world’s leading and most diverse derivatives marketplace and the largest regulated market for foreign exchange, today announced the launch of new foreign exchange (FX) futures contracts based on the Chinese Yuan (CNY), or Renminbi. In order to meet growing global customer demand for products denominated in the Chinese currency, these innovative new futures contracts will be quoted in interbank (European) terms, reflecting the number of CNY per US dollar. These futures products are aligned with the OTC market convention for non-deliverable forwards while providing the benefits of counterparty risk mitigation from exchange-traded derivatives. These new currency products, which will be listed on and subject to the rules and regulations of CME, will launch Monday, 22 August for September 2011 settlement and will be allocated to the IMM (International Monetary Market) Division.

“Given the Yuan’s movement toward greater convertibility and the growing offshore trade of the currency in Hong Kong, CME Group has developed these innovative new (CNY) futures contracts to further enable our customers to more effectively manage their currency risk with the counterparty risk mitigation benefits of an exchange traded product,” said Roger Rutherford, Managing Director FX Products, CME Group. “The launch of our new Yuan contracts demonstrates CME Group’s continued commitment to our global customer base by creating new products that are relevant to both mature and emerging markets. We see the success of these new contracts following a similar pattern to that of our other emerging markets products such as Russian Ruble and Brazilian Real, which have seen year to date growth of 350% and 450% respectively. These significant increases in both volumes and open interest reflect increasing demand for credit risk mitigation in emerging markets products, and we believe that our new Yuan futures products provide these same benefits for customers managing their Yuan currency risk.”

In order to serve both the institutional as well as the retail market, CME Group will list both a full-sized USD/RMB (CNY) contract as well as an E-micro version. These new contracts join CME Group’s existing RMB/USD futures contract, launched in June 2006, and are all traded on CME Globex as well as available for Blocks and EFPs via CME ClearPort.

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