On May 18, China Foreign Exchange Trade System (CFETS), a subsidiary of the People’s Bank of China, launched a multi-bank trading portal using foreign exchange technology from Reuters.
The move is seen as a potential step in the process toward a revaluing of China’s currency, which has been pegged at 8.28 renminbi (RMB) to the dollar for a decade.
The CFETS portal is based on a customized version of the Reuters Electronic Trading platform and is deployed in its data center in Shanghai. Traders in China’s commercial hub can now deal in eight currency pairs, none of which involve the renminbi: U.S. dollar against the Euro, Japenese yen, Hong Kong dollar, British pound, Swiss franc, Australian dollar, and Canadian dollar; plus the Euro vs. the Japanese yen.
The CFETS says in the first five hours of trading, 74 deals were conducted with turnover of $204 million. Regular trading in the renminbi averages about $1.5 billion a day, according to data from CFETS.
The system sits alongside a decadeold platform allowing the renminbi to be traded against the Euro, yen, Hong Kong dollar, and U.S. dollar.
The CFETS is the only organization licensed to trade foreign exchange in China. CFETS-member banks can use a real-time, Internet-based foreign exchange multi-bank portal with the goal of furthering the growth of forex trading in China. The financial institutions with permission to trade foreign currencies will be able to trade streaming, executable prices contributed by 10 price making institutions: ABN AMRO, Bank of China, Bank of Montreal, Citic, Citibank, Deutsche Bank, HSBC, ICBC, ING, and the Royal Bank of Scotland.
CFETS also offers full trading, settlement and clearing facilities to all its members and market makers. Domestic banks in China can enter orders, request a price, or execute forex transactions for any of the non renminbi currency pairs quoted on the portal.
With the systems, CFETS can now offer its member banks access to executable prices from global liquidity providers and allow domestic financial institutions that may otherwise not have the credit to trade in the international currency markets.
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