Frequent Asked Questions

Transcription

1 Frequent Asked Questions 1. What are RMB currency futures? What will be the underlying currency pair? RMB currency futures are futures contracts based on the exchange rates between RMB and other currencies. Our first RMB currency futures contract is based on the currency pair USD / CNH. CNH refers to the RMB circulated in Hong Kong. It is the world s first deliverable RMB currency futures contract ever listed. It is a financial instrument for managing RMB exchange rate risk exposure. 2. What will be the trading hours of the RMB currency futures contract? Does HKEx have any plan to extend the trading hours? What will be the holiday schedule? The trading hours are between 9:00 a.m. and 4:15 p.m. with no lunch break. HKEx is also planning to include RMB currency futures into the after-hours trading session after it is implemented, which will be traded up to 11:00 pm. RMB currency futures will be traded according to Hong Kong holiday schedule. 3. At expiration, what will happen to the position holders in RMB currency futures? The contract will be settled at expiration by exchanging principal (contract size in USD100,000 ) versus payment in RMB based on the Final Settlement Price of the contract, i.e. spot USD/CNY (HK) fixing published by the Treasury Market Association in Hong Kong. Delivery of US dollars will be made by short position holders (or the sellers) and payment of the Final Settlement Value in RMB by the long position holders (or the buyers) on the final settlement day. 4. What is the spot USD/CNY (HK) fixing of Treasury Markets Association? The spot USD/CNY (HK) fixing of Treasury Markets Association (TMA) is the benchmark for market exchange rate of USD against CNY(HK). The Spot USD/CNY(HK) Fixing is published at around 11:15 a.m. Hong Kong time each business day (excluding Saturdays) on TMA s website and by Thomson Reuters.

2 5. When will RMB currency futures be settled? Does the final settlement day tie up with certain currency futures settlement day? The final settlement day will be on the third Wednesday of the contract month, which follows market convention of currency futures. 6. How should brokers prepare to trade and clearing RMB currency futures? Exchange Participants and Clearing Participants should review their front office and back office systems and make necessary enhancements, if required, in order to support trading and clearing operations relating to RMB currency futures. Clearing Participants have to set up RMB and USD settlement bank accounts with HKCC, the clearing house of RMB currency futures products, for both house and client accounts to clear and settle trades in RMB currency futures. 7. How should Exchange Participants or Clearing Participants handle principal exchange at expiration of RMB currency futures? Clearing Participants are required to set up USD and RMB clearing accounts with the HKCC, the clearing house of RMB currency futures, in order to handle the principal exchange of RMB currency futures. At contract expiration, Exchange Participants, Clearing Participants and their clients can obtain currency exchange services from banks to meet the delivery obligations within the two business days from the last trading day to the final settlement day. Brokers are advised to set up procedures to alert clients regarding the delivery obligations ahead of the last trading day and inform their clients on the settlement procedures upon contract expiration. If their clients are not intended to make or take delivery, brokers should advise their clients with outstanding positions in RMB currency futures to close out expiring positions before expiration or roll over to other contract month. 8. Would there be market makers or liquidity providers for RMB currency futures? HKEx has appointed market makers for the RMB currency futures contract to provide trading liquidity for the contract. Market makers provide continuous two-way prices with a maximum quote spread of 30 ticks (0.0030) and a

3 minimum quote size of 10 contracts for all contract months for 70 per cent of the trading hours in a month. 9. Will there be any restrictions for participating in RMB currency futures market? All Futures Participants of HKEx which have set up USD and RMB settlement accounts with HKCC, the derivatives clearing house of HKEx, can access the RMB currency futures market and offer this new product to their clients. 10. Who are the target user group of the RMB currency futures contract? Banking and financial institutions, fund managers (in particular QFIIs and QDIIs), companies with RMB related trading business and individual investors who want to gain or manage RMB exposures are the target users of RMB currency futures. 11. Will Exchange Participants, institutional investors or individual investors using the RMB currency futures be subject to the RMB 20,000 daily exchange limit? The RMB 20,000 daily exchange limit is a requirement of a clearing agreement (the Clearing Agreement ) that banks have entered into with the Bank of China (Hong Kong), the clearing bank for RMB in Hong Kong. The daily exchange limit is not applicable to Exchange Participants, institutional investors or individual investors using the RMB currency futures. The CNH transactions at the expiration of RMB currency futures will be transactions entered into between HKCC, the clearing house of RMB currency futures, and Clearing Participants which are holding positions in RMB currency futures at expiration. HKCC is not a party to the Clearing Agreement. 12. How does HKEx s RMB currency futures compare to CNH deliverable forwards offered by banks? The futures market supported by the clearing house s central counterparty service will be serving different sets of risk management needs and will complement the overall development of offshore RMB business in Hong Kong. RMB currency futures will be a multilateral trading market with high level of price transparency, which will be an efficient and competitive environment to the benefits of market

4 users. 13. How would RMB currency futures be margined and settled? The USD/CNH futures contracts are margined in Renminbi (RMB) and Participants are required to settle the full principal amount by making and taking deliveries of USD and RMB upon final settlement. 14. What is the minimum settlement currency requirement for RMB currency futures? Same as other existing HKCC products, at least 50% of the margin requirement for USD/CNH futures in each CCMS Collateral Account of a Participant must be covered by cash in the settlement currency (i.e. RMB). The remaining margin requirement can be satisfied by other forms of approved collaterals. Participants who are interested in clearing USD/CNH futures are strongly advised to make necessary arrangements in advance to ensure there is sufficient cash collateral in RMB to meet the requirements. 15. What would happen if Clearing Participants fail in fulfilling obligations upon final settlement? In the event that a Participant fails to fulfill its obligations upon final settlement under the USD/CNH futures contract, HKCC will take such action as it considers appropriate, including executing a buy-in and/or a borrowing of the underlying currency and/or executing a purchase and/or a borrowing of the currency in which payment is required to be made to effect settlement as soon as practicable. The defaulting Participant may be imposed a penalty charge equivalent to 0.25% of the market value on the final settlement day of its overdue positions and/or payment obligations, and shall indemnify the clearing house and the exchange against all costs, fees, expenses, liabilities, losses and damages that may be incurred in executing a buy-in, effecting a purchase or borrowing and taking such other action as the clearing house considers appropriate.

5 16. What is spot month charge to be introduced for RMB currency futures? HKCC will introduce a new margin parameter named spot month charge for USD/CNH futures, tentatively scheduled to be implemented in the fourth quarter of This charge, set at 20% of the clearing house and client margin rates, will be imposed on the spot month contract during the last four business days before the business day immediately preceding the final settlement day. Participants who are interested in clearing USD/CNH futures are strongly advised to make necessary arrangements in advance to ensure that their back office systems can support the calculation of spot month charge as part of the margin calculation process. 17. What is the margin rate of RMB Currency Futures? Clearing House and Client margin levels are established with reference to historical price volatilities, current and anticipated market conditions, and other relevant information. At product launch, the minimum client margin rate is set at RMB 7,930, (about 1.25% of the notional value). The margin rate will be regularly reviewed based on market conditions. Exchange Participants should set their margin requirements according to each client's individual circumstances. Investors are required to remind that the margin rate is subject to amend due to the change of market conditions and should consult the Exchange Participant for the actual margin amount.