CME debuts offshore yuan options to tap rising trading demand
- The CME options have a range of expiry dates and are based on futures contracts with a notional amount of US$100,000
- As CME is a much smaller yuan-trading hub than Hong Kong, traders say it may take time for volume to pick up
Chicago’s CME Group opened options trading for Chinese yuan futures on Monday, as it looks to deepen a market that investors use for betting or hedging against moves in China’s currency.
Hong Kong has offered similar exchange-traded options since 2017, though bringing the product to CME – the world’s biggest derivatives exchange – may be a step towards competing with the banks that dominate options by selling directly to customers.
“Many traders no longer view CNH as an emerging-market currency like it was 10 years ago,” said Chris Povey, CME Group’s executive director of FX products based in London, referring to the ticker symbol for the offshore-traded Chinese yuan.
Povey said customers from investment institutions to small time traders were interested in exchange-traded yuan products.
A futures contract is a financial contract where parties agree to a transaction at a fixed price in the future. An option affords its buyer the opportunity to buy or sell an underlying asset, in this case a futures contract, at a fixed price in the future.