RMB Currency Futures Volatility Leads to Record Trading Volumes at Hong Kong Exchanges

To support the further growth of RBM futures the Hong Kong Exchanges and Clearing group is introducing an "Active Trader"

HKExHong Kong Exchanges and Clearing Limited (HKEx) has just announced that trading currency futures on the Chinese Yuan (RMB) have set a new daily record this month and that it is introducing additional measures to solidify the development of the RMB currency futures market.

As for the reason behind the surge in volume, HKEx speculates that its RMB currency futures contracts have proven themselves as an effective risk management tool for market users amid the increased USD/CNH volatility.

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Turnover in HKEx’s RMB currency futures product reached an eight-month high on December 9, 2014 at 4,608 contracts with a notional value of RMB 2.8 billion. Trading volumes of the product in the After Hours Futures Trading (AHFT) session also continue to grow, having reached 7.8 percent of the volume in the day session. RMB Currency Futures were introduced into AHFT on April 7, 2014, and turnover of the product reached an all-time record high of 6,318 contracts on March 19, 2014.

“We have seen steady growth in our RMB currency futures product since its launch in 2012, and especially recently because of higher volatility,” said Romnesh Lamba, co-head of HKEx’s Global Markets. “The RMB was long seen as a one-way bet, and its movement in both directions this year has attracted more investors who are using it as an effective hedging tool to manage risk. We expect these new incentive programmes to make the product even more widely traded in 2015.”

The exchange also said more participants are now taking part, with two new participants trading the RMB contract in early December. Their participation brings the total number of participants who have traded the product to 79.

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New Market Makers and Incentive Programmes

To support the further growth of RBM futures the HKEx group is introducing two new incentive programmes as well as two new currency market makers. Bank Sinopac Hong Kong Branch will join as a market maker effective Friday December 19, 2014, while Celestial Commodities Limited joined on Monday, August 25, 2014. HKEx says it is continuing to work on recruiting new market makers for RMB currency futures.

HKEx’s wholly owned subsidiary, The Hong Kong Futures Exchange (HKFE), is implementing the new initiatives for trading RMB currency futures starting on January 2, 2015. The “Active Trader Programme” will provide a trading fee rebate for trading RMB currency futures to a limited number of traders.

The trading fee rebate for Active Traders who meet the specific threshold will be ¥6 per contract. To be eligible for the rebate, an Active Trader will be required to meet a minimum volume threshold of an average daily volume of 30 RMB currency futures contracts during a given month.

Meanwhile, in order to enhance market liquidity, a Spread Enhancement Programme is also open for application and for market makers of RMB currency futures only. A 100% trading fee rebate and certain sponsorship for trading RMB currency futures will be available for Spread Enhancement Programme participants who meet certain quoting requirements.

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