Taiwan yesterday launched its first yuan futures contracts on the Taiwan Futures Exchange (TAIFEX) in the government’s latest efforts to make Taiwan a regional offshore trading hub of the Chinese currency.
“The launch of the new yuan currency futures contracts will leverage Taiwan’s advantages over other major offshore renminbi clearing centers such as Hong Kong and London,” Financial Supervisory Commission (FSC) Chairman William Tseng (曾銘宗) told an investor conference in Taipei.
These advantages include the considerable inflow of yuan earned by the vast number of Taiwanese businesses operating in China, which has propelled domestic yuan deposits to more than 338.2 billion yuan (US$54.4 billion), and the sizeable circulation of other yuan-denominated products such as Formosa bonds and insurance policies, Tseng said.
Photo: CNA
TAIFEX chairman Liu Len-yu (劉連煜) said that the two futures contracts are the first foreign exchange products to be listed since the exchange’s founding in 1998.
The contracts are listed as the RTF and the RHF.
The RTF has a contract size of US$20,000 and settlement prices based on the US dollar to yuan spot rate (CNT) set by the Taipei Foreign Exchange Market Development Foundation.
It is designed for domestic retail investors more familiar with the CNT rate.
The RHF has a contract size of US$100,000, and settlement prices based on the US dollar and yuan fixing by the Treasury Markets Association of Hong Kong (CNH) and is meant for institutional investors who are more accustomed to the association’s rate.
“Investors will find that the price spread of these contracts will be very similar to listings on Bloomberg, and much more favorable than what they can obtain from local banks,” said Harry Yen (顏輝煌), director-general of the central bank’s Department of Foreign Exchange.
It is hoped that a more complete product offering will provide traders with more investment and hedging opportunities, and most importantly, an avenue for yuan reflow, Liu said.
Trading of the futures will be facilitated by eight market makers, including four domestic futures proprietary merchants, two domestic banks and the Taipei branches of Bank of China (中國銀行) and China Construction Bank (中國工商銀行), which are acting in the capacity of institutional investors.
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