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HKEx set to launch yuan futures this summer

PUBLISHED : Friday, 20 April, 2012, 12:00am
UPDATED : Monday, 27 June, 2016, 11:50am

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Hong Kong Exchanges and Clearing (HKEx) plans to launch yuan futures in the third quarter, a move that would help investors hedge their exposure to the currency and solidify Hong Kong's status as the main centre for the offshore yuan trade.

HKEx announced the plan yesterday, just one day after HSBC issued the first yuan-denominated bonds in London in a big move to advance the City of London's push to become a major centre for the offshore yuan trade itself.

The exchange's chief executive, Charles Li Xiaojia, said the plan 'reflects our desire to support Hong Kong's development as an offshore RMB centre'. He called the initiative part of the exchange's 'strategy to expand beyond equities and equity-related derivatives'.

HKEx also said it would seek to expand business by venturing into fixed-income, currency and commodities products.

The city's bourse had over the years built up strength in equity- related financial products, but remains a relatively small player in the markets for other types of products, said Raymond Yeung, an economist at ANZ Bank.

'HKEx would need to compete against the OTC [over the counter] market, and I don't think it would be able to replace the OTC market in the near term,' said Yeung. The OTC market allows parties to trade directly without going through the bourse. It is already offering a range of products, such as yuan non-deliverable forwards and CNH (yuan traded in Hong Kong) deliverable forwards.

The yuan trades at different exchange rates to the US dollar on the mainland and in Hong Kong. Beijing maintains tight control on the onshore yuan, or CNY, exchange rate.

Shanghai has also been preparing to come out with USD/CNY futures, so the two markets could complement each other.

HKEx's USD/CNH futures contract will require delivery of US dollars by the seller and payment of the final settlement value in yuan by the buyer at maturity. The contract will be quoted in 'RMB per US dollar', with the trading and settlement fees charged in yuan.

HKEx has scheduled a market readiness test in June and invited applications from potential market makers for USD/CNH futures.

'We have been working with our participants and information vendors to prepare our derivatives market for RMB-traded products and look forward to introducing our derivatives market's first RMB-traded futures product,' said Calvin Tai, HKEx's head of trading.