CME and China’s Cfets push for link-up

Officials from the Chicago Mercantile Exchange (CME) and the China Foreign Exchange Trade System (Cfets) have unveiled plans for a multi-year agreement in Shanghai to allow Chinese investors to trade CME’s foreign exchange and interest rate products.

The yet-to-be finalised deal, the follow-up to a memorandum of understanding signed in 2004 between the two institutions, is intended to open up foreign exchange and interest rate futures and options trading over the CME's Globex electronic trading platform to Cfets members.

Under the terms of the agreement, Cfets will act as super-clearing member for domestic investors trading the CME’s interest rate and FX products. Both the CME and Cfets will offer consulting and technical services to Cfets members and staff. The CME has agreed to offer training programs focusing on operational and risk management procedures in Shanghai and Chicago for Cfets staff. The Chicago-based exchange will also train Cfets members, which include commercial banks and non-banking financial institutions among others on trading and related technology and risk management practices.

"Access to the CME’s global interest rate and FX futures and options contracts will provide Chinese institutions and investors with a new range of foreign currency denominated investment and risk management tools that complement Cfets’ product offerings,” CME chief executive Craig Donohue said.

The CME’s products include interest rate futures and options on futures that can be used to hedge interest rate risks from one day to 10 years, as well as 36 individual FX futures and 23 options on futures products.

Cfets operates China’s interbank foreign exchange and bond market. It currently accommodates trading of spot and forward currencies, renminbi-denominated lending, selected foreign currency lending, government notes, securities and repo transactions.