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CME Group to Launch Offshore Yuan Currency Futures

CME Group, the biggest U.S. futures market operator, said on Thursday it plans to expand its offering of yuan products to include deliverable offshore yuan futures, a move which should further help internationalize China's currency.

HONG KONG -- CME Group Inc, the biggest U.S. futures market operator, said on Thursday it plans to expand its offering of yuan products to include deliverable offshore yuan futures, a m ove which should further help internationalise China's currency.

The U.S. dollar/offshore yuan (CNH) futures will be available in contract sizes of $10,000 and $100,000, which will allow for more flexible hedging and is likely to appeal to retail traders.

CME Group plans to have the futures dual-listed on the CME and CME Europe Ltd in the fourth quarter of this year and second quarter of 2013, respectively.

"The renminbi is going to be an international currency and we are facilitating and helping that happen," K.C. Lam, director of FX products at CME Group, told Reuters in a telephone interview, adding it is targeting asset managers, funds and commercial customers.

"Even financial institutions outside of Asia, where they do not have access to CNH but want to have exposure or have risk management needs, they might want to have this product."

The Hong Kong stock exchange said last month it would launch the first USD/CNH futures on Sept. 17, aiming to capitalise on the product's transparent pricing and lower counterparty risks to attract investors to the nascent offshore yuan market.

Before the launch of the standardised futures contracts, market players have been making use of the offshore yuan deliverable forward (DF) and non-deliverable forward (NDF) market to hedge their yuan exposure or speculate on yuan appreciation.

Lam said CME's CNH futures contracts will extend to as long as three years compared to the one-year tenor offered by the Hong Kong exchange, partly to meet the offshore yuan bond investors' needs since typical dim sum bond tenors are around 2-3 years.

CME now has a yuan product offering that includes cash-settled yuan futures and clearing for OTC NDFs in USD/CNY.

The September USD/CNY futures contract closed at 0.157850 on Wednesday, implying the yuan would reach 6.3351.

The company offers 56 futures and 31 options contracts, reflecting an average daily notional value of $110 billion in 2012. It also provides OTC clearing services for 12 OTC NDF currency pairs and 26 cash settled forwards.

China has been promoting the international use of the yuan in trade for the past two years to reduce the country's reliance on dollar financing. A thriving market in yuan-denominated bonds and deposits has sprung up in Hong Kong as a result and banks and exchanges from Singapore to London are eager for a piece of the action.

China is planning to make the yuan basically convertible as early as 2015 and, further down the road, turn it into a global currency on par with the U.S. dollar.

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