Asian Rivals Unite To Bolster Offshore Chinese Yuan Trading

Surprising turn of events in Asia as two fierce competitors call it truce. The Singapore Exchange and Hong Kong Exchange

images (2)Asia’s two leading financial trading hubs, Singapore and Hong Kong are in constant battle as both regions look for the top spot in Chinese related instruments. A notification issued by the main exchanges of both countries state that the two have signed a memorandum of understanding (MOU) focusing on the offshore Renminbi (RMB) market.

Under the agreement the two exchanges, the Hong Kong Exchanges and Clearing (HKEx) and Singapore Exchange (SGX), will collaborate on a range of initiatives which include; the promotion of the internationalization of the renminbi by exploring joint product development; enhancing connectivity through points of presence in each other’s data centers; collaborating on technology development and regulatory issues; and may work closely in relation to extraterritorial market infrastructure regulation impacting the Asian region.

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The agreement was signed in Singapore by HKEx’s Chief Executive, Charles Li and SGX CEO, Magnus Böcker.

Mr. Li spoke about the partnership in a statement: “This MOU allows us to build on Hong Kong’s position as the premier offshore Renminbi center by developing closer links with Singapore and helping regional investors deploy a growing pool of investable offshore renminbi. We are also very pleased to establish a framework for cooperation with SGX on global regulatory issues and technology development, two critical areas for exchanges.”

Singapore’s Mr Böcker said in the media briefing: “Our collaboration with HKEx, through new products and services available on both exchanges, is yet another example how the Asian Gateway enables easier access to Chinese capital markets. By including regulatory collaboration in this partnership, we are paving the way for Asian markets to have a more prominent and unified voice regarding global developments and regulatory reforms.”

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Several FX brokers offer trade execution in emerging market currency pairs. FXDD, a US- based broker who offers a range of currency pairs, Robert C. McKeon, Senior Vice President of Markets and Liquidity at FXDD believes the market will continue to grow, he said in a comment to Forex Magnates: “There is no question as time moved forward the CNY/CNH will grow their volumes and gain a greater share of the world currency turn over.”

The Chinese yuan has entered the top ten most liquid currency pairs, according to the BIS FX Survey 2013.

Both exchanges have been pioneers in establishing currency futures in emerging market currency pairs, including the Chinese yuan. Last month, HKEx launched OTC Clear, an inter bank clearing solution for NDFs; members include Bank of China and ICBC.

Singapore Exchange’s cooperation with its Hong Kong rival is an interesting proposition, this could have been triggered by the acquisition of ICE and SMX, thus signalling competition in the South-East Asian market.

SWIFT, the international payments provider has seen an influx in RMB transactions, research shows that RMB usage in traditional trade finance – Letters of Credit and Collections – grew from an activity share of 1.89% in January 2012, to 8.66% in October 2013.

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