Chinese Corporates Benefit from New Flexible FX Derivatives Rules  

China’s foray into the world of international financial trading continues with the widening of its FX derivatives product range. The State Administration of Foreign Exchange (SAFE), the country’s main regulatory authority for currency trading, has enhanced the offerings available to corporates. The move comes on the back of Beijing’s commitment to strengthening China’s position in the global financial markets landscape.

Global banks prominent in Asia have responded to the news from China’s financial watchdog for FX, by launching new Chinese yuan currency options products. HSBC and Standard Chartered Bank, as reported by local media, have both developed new product offerings to cater to the needs of China’s corporates.

Standard Chartered's products will give users the ability to combine a vanilla European-style renminbi FX options with another leg, thus catering to the diverse requirements of corporate clients who have specific hedging needs. HSBC has also launched a similar offering thus enabling more flexibility in managing currency risk.

The new structured derivatives rulings SAFE issued on the first of August, will allow firms to use different strategies to minimise their risk. Previously, corporates were restricted in the way they used derivatives prices and could only use simple yuan-based options.

Increasing CNY Onshore and Offshore

The Chinese yuan has been one of the best performing currency pairs of the BRICS nations, in the recent BIS Triennial Survey 2013, it was ranked the ninth most actively traded currency pair across the globe. Initiatives by the regulators who increase the usage of the yuan will aid and assist the further growth of the currency. Analysts expect the Chinese yuan to be in the top five currencies traded by 2020.

China has been developing its overall infrastructure to compete on a global scale, the Shanghai free-trade zone is the first step in a series of moves being implemented in a bid to become the powerhouse of Asia financial transactions.

Global FX and CFD brokers have been expanding their product range to accommodate EMFX pairs. Activity is gradually increasing in less liquid EMFX crosses, as practises such as the widening of the daily range the yuan trades in allows traders to explore trading opportunities in the currency pair. Russia’s main derivatives exchange announced that its benchmark CNY RUB contract saw record trading activity on the 31st of July, the highest figure since launching four years ago.