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Central bank unit and ICAP launch money broking venture

China Foreign Exchange Trade System (CFETS), a unit controlled by the central bank, yesterday launched a money brokerage joint venture with the world's biggest interdealer broker ICAP, as part of the regulator's effort to boost transparency and develop the money market.

Shanghai-based CFETS, also known as National Interbank Funding Centre which provides voice broking services to members of the trading platform, will own 66 per cent of the venture with ICAP holding the rest. The two partners will invest 61 million yuan to fund the venture.

'China is making great strides in developing its financial markets and the interbank market will continue to play a key role,' said Li Yu, the vice-president of CFETS. 'Working with ICAP will further support the growth of this market.'

Shanghai CFETS-ICAP International Broking is the second money brokerage venture on the mainland after Tullet Prebon Sitico (China), opened by Tullett Prebon and Shanghai International Trust & Investment, in December 2005.

'The launch of the venture is further evidence of the government's determination to develop the money and derivative market after the capital market has been whipped into shape,' said Chen Xuebing, a vice-director at the Institute of Financial Studies at Fudan University.

'China needs a developed money market in tandem with its increasing financial might.'

Mark Yallop, chief operating officer of ICAP, said that the venture would help enhance transparency for yuan-denominated products and make the market more efficient.

Shanghai CFETS-ICAP employs 30 people and the CFETS will spin off its brokerage business and merge the business into the joint venture, Mr Li said.

Daily turnover in the mainland's interbank market amounts to about 300 billion yuan, about double last year's figure, according to Reuters calculations.

'China is at a critical point in the development of its financial markets and this joint venture offers a unique opportunity to participate in the growth of the Chinese interbank market - potentially one of the largest in the world,' Mr Yallop said.

Worldwide, ICAP has an average daily transaction volume of more than US$1.5 trillion.

Electronic broking services account for more than 50 per cent of the final contribution.

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