UK Lists First Money Market ETF Quoted in Renminbi as it Steps-Up Offshore Chinese Trading

UK-based retail and institutional investors will gain access to the growing Chinese market through a newly-listed financial instrument that is quoted in the county’s local currency. In a bid to strengthen its position as the dominant force in offshore Chinese markets, Britain’s main financial trading venue, the London Stock Exchange (LSE) has listed the ‘Commerzbank CCBI RQFII Money Market UCITS ETF’ a new money market ETF.

The new instrument gives investors access to the restricted China market. Investors have to hold certain classifications before they can invest in the second largest economy on the planet, with the new listing allowing UK and European investors direct access to the market place.

The listing was launched by key members of the UK and China business and government community, including; Dr. Hu Zhanghong, CEO, CCBI, Andrea Leadsom MP and Economic Secretary to the UK Treasury; Minister Counsellor Jin Xu, Embassy of the People’s Republic of China to the United Kingdom and Xavier Rolet, CEO of the London Stock Exchange Group.

Xavier Rolet, CEO of LSE commented about the launch in a statement, he said: “This is a landmark listing for London and an important sign of the market’s openness to new RMB product development. We are fully committed to supporting the efforts of the Chinese and the UK Governments in developing an off-shore RMB market in London through innovation and partnership.”

London RMB Volumes

Transaction in the Chinese Yuan have been growing sporadically as both speculators and hedgers increase their exposure to the asset class, coupled with China’s continued growth in the global market. The combined volumes in the on-and-offshore crosses, CNY & CNH helped China enter the top ten most liquid currencies internationally traded, as per the 2013 BIS triennial Survey.

London has been doing its utmost to hold onto its claim as the world’s financial capital, it has been cooperating with key authorities in China in order to stream-line and enhance the operating environment with a specific Chinese division in the City of London, a government organisation that promotes London internationally.

According to data issued by the City of London, in 2013, the value of trades in RMB executed in London grow, the report states: “Deliverable Forex business grew very rapidly in the first half of 2013 with overall deliverable volumes more than doubling in comparison to 2012 levels. FX options growth was especially strong rising from a relatively low level. Comments suggest that investors continue to gain confidence in the offshore market and the range of investor’s increases. Current estimates suggest that the market is split roughly equally between corporate investors, hedge funds and trade/capital flow-driven activity.”

With figures from the authority showing that Spot RMB forex grew to an average daily volume of US$4.8 billion, a 93% increase compared to 2012.

The latest product launch is the first of its kind in the EU and supports London and LSE's pre-eminent position as the leading international financial centre for trading of RMB products. London is at the forefront of RMB-product development and has recently introduced CNY and HKD trading for ETFs, supported by clearing and settlement.

The LSE has been active with Chinese instruments, currently there are four RQFII ETFs listed on venue and since the first London listing in January 2014, RQFII ETFs have traded over $2.23 billion in value and accounted for over 7000 trades on London’s markets.

The latest product is a good sign for FX brokers that offer Chinese Yuan CFD contracts as investors with exposure in the ETF will have trading venues to hedge their open exposure with, thus boosting volumes in the cross.