ADM Investors is enhancing its offering for Chinese clients. The firm has announced that it can accommodate deposits in the offshore Chinese yuan contract, CNH. The broker joins the ranks of a few selected firms that offer traders the funding options. ADM Investors reported in a note to clients that it has included the BRICS currency in its list of funding currencies. The US-listed broker joins Interactive Brokers which also offers depositing facilities in the currency pair.
The move signifies the growing importance of China as a dominant force in global economics. The CNH cross is a contract launched by Hong Kong in order to facilitate global trade in the yuan, a restricted currency in mainland China.
ADM Investors is offering the currency through its account at international banking institute, JP Morgan. The key advantage is that ADM provides deliverable FX in pairs involving this currency to its customers, in addition, this can now be arbitraged with other markets whether they are futures or NDFs.
The new arrangement is expected to strengthen the role of China and its currency in financial trading. Although the currency was ranked in the top ten most liquid currencies in the 2013 BIS Survey, it still lacks in trading interest from retail investors, the new arbitrage opportunities could open up the currency pair to new types of traders.
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The new product allows users who have an interest in the CNH to hedge their risk and exposure. ADM will be able to pay & receive the currency under its terms with JP Morgan.
Globalizing the Yuan
Contracts that track the onshore Chinese yuan have been growing in popularity, Hong Kong’s main financial trading venue, the Hong Kong Exchange (HKeX) launched the yuan derivatives contract in September 2012, thus giving corporates and traders the ability to gain exposure to the cross. Hong Kong’s rival, Singapore, recently launched a similar futures contract, the two financial centers have been battling against each other to position themselves as the preferred location for overseas Chinese yuan trading.
In a recent bilateral meeting of leaders of Singapore and China, the world’s second largest economy will allow direct trading between its currency and the Singapore dollar from Tuesday the 28th of October, thus simplifying the way companies do business here to conduct business with their Chinese counterparts.
The Singapore dollar will be added to the country’s main payment mechanism, the China Foreign Exchange Trade System (CFETS) platform, which currently offers transactions between the yuan and 10 foreign currencies.