RMB to foreign exchange option trading approved

To facilitate market participants to avoid exchange rate risk the initial product type is limited to ordinary European options, only allow enterprises to buy options, prohibit the sale of options newspaper Beijing, February 16 (reporter Tian Junyong) recently, the State administration of foreign exchange approved the Chinese currency trading center in the inter-bank foreign exchange market organization to carry out renminbi exchange options trading,　　and issued the relevant notice, since April 1, 2011, the implementation. Last year, all kinds of RMB foreign exchange derivative trading volume of more than 1.6 trillion U.S. dollars, but the single trade variety is understood, options and forwards, futures, swaps (swaps) is the most basic of the four derivative products. Since the reform of RMB exchange rate mechanism in July 2005, China's foreign exchange market has been developing rapidly and the trading varieties are becoming richer, and the banks have launched three kinds of RMB foreign exchange derivative products such as forward, foreign exchange swaps and currency swaps successively in customer markets and inter-bank exchange markets. 2010, all kinds of RMB foreign exchange derivative products accumulated trading volume of more than 1.6 trillion U.S. dollars, up 64.8% from the previous year.　　But compared with developed economies and some emerging market economies, the trading varieties of China's foreign exchange market are still single and the product function is not diversified. According to the official of the foreign exchange administration, with the increase of RMB exchange rate elasticity, the demand of the enterprises, banks and other market subjects to use derivative products for hedging is increasing.　　In recent years, enterprises, banks and other market subjects to the derivative of the understanding of the mature, in a reasonable and flexible use of existing products, on the basis of options for this new product trading will enhance. Limit the enterprise "naked sell" option, strict market access management notice clear, market development in the early stage of the product type limited to the maturity of the ordinary European options.　　The structure of ordinary European options is simpler, and the requirements for bank pricing and risk control are relatively easy, and they are easy for customers to understand and the overall risk controllable. The notification does not allow the customer to sell options. Considering the risk identification and control ability of domestic enterprises is still in the growth stage, in order to avoid excessive bear the risk of the transaction, the market initially allows only the enterprise to buy options, prohibit the sale of options.　　From international experience, restricting the "naked selling" option is a common practice in emerging market economies. The notice stipulates that the client should comply with the principle of real demand for option business.　　In line with the existing forward-sale business, in order to prevent large-scale pure speculative transactions, enterprises must have real trading background such as trade and investment. The notice also calls for stronger regulation of bank options trading. Strict market access management requires banks to have more than three years of forward trading qualifications to ensure that participating banks have the necessary trading experience and risk management capabilities. The bank carries out the option business into the bank to carry out the foreign Exchange management policy condition examination scope, the omni-directional strengthens the supervision.　　To strengthen market monitoring and business guidance, and regularly monitor the risk status of bank options business. The official said that the announcement of the notice, conducive to the formation of a complete option market structure, improve the domestic foreign exchange market renminbi to foreign exchange derivative products system, further facilitate the enterprises, banks and other markets to avoid exchange rate risk, conducive to continuousWe should promote the development of domestic foreign exchange markets and give full play to the basic role of market in resource allocation.　　What is forex Option Trading (link) Foreign exchange option trading refers to the transaction between the parties during the stipulated period in accordance with the terms of negotiation and a certain exchange rate, on whether to buy or sell some kind of foreign exchange option in the future. The characteristic is that regardless of whether the contract of foreign exchange is fulfilled, the option transaction fee paid by the buyer of the foreign exchange option is not recoverable. In the course of the transaction, the buyer of the option has the right to choose whether to actually execute the contract, and the seller of the option can only passively accept the buyer's choice and not refuse to accept it.　　For the buyer of the option, the cost is fixed and the return is uncertain; for the seller of the option, the biggest benefit is the option fee, and the loss is uncertain. (Liu Xianyun)