As of the end of March, open interest in April CNH futures on the CME totalled $49.3 million, compared to $448.9 million traded on the Hong Kong Exchanges & Clearing , data from the two exchanges show. (Reporting by Georgina Lee; Editing by Raju Gopalakrishnan)
(Corrects typo in executive's name in 7th paragraph)
By Georgina Lee
HONG KONG, April 3 (Reuters) - 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 toward 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 ten 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.
Exchange-traded options offer a way to bet on the yuan's
direction without dealing directly with banks, which write
options and sell them over-the-counter to customers in far
larger volumes than those settled on global exchanges.
"We hope to see liquidity develop there that's comparable to
the over-the-counter market," said Tim Brooks, London-based head
of FX options at Optiver, which will deal in the new CME
derivatives.
The CME options have a range of expiry dates from
weekly, to monthly or a year and are based on futures contracts
with a notional amount of $100,000.
CME is a much smaller yuan-trading hub than Hong Kong. Some
who trade both over-the-counter and exchange-based options say
it may take time for volume to pickup.
"Trading volume of FX contracts remains a struggle for many
exchanges, which are largely dominated by retail traders and
very few large banks participate as market maker," said Mukesh
Dave, chief investment officer at Aravali Asset Management, a
Singapore-based hedge fund.
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