CME director optimistic about growth of yuan products

Derek Sammann Photo: Chen Tian/GT

A top executive of the Chicago Mercantile Exchange (CME) Group said on Wednesday that he was highly optimistic about yuan-linked financial derivatives, as China's central bank has been keeping up efforts to liberalize the currency.

Derek Sammann, senior managing director of CME's FX (foreign exchange), Metals and Options Solutions, told the Global Times in an exclusive interview on Wednesday that the demand for offshore renminbi products, including options, futures and swaps, will increase.

"We are very confident in the growth prospects, not only of our own futures products, but other exchanges' futures products as well," Sammann said.

CME, which claims to offer the widest range of global benchmark products including futures and options, handles 3 billion contracts worth about $1 quadrillion annually. It manages exchanges in the US and London.

China has made a few moves for liberalizing and internationalizing yuan since beginning of this year. The People's Bank of China, the central bank, widened the trading band of yuan in March, while the Shanghai Stock Exchange announced in April that it will allow Hong Kong retail investors to buy A shares with yuan starting in October.

According to Sammann, CME Group launched Chinese deliverable offshore RMB futures (CNH futures) on February 25, 2013, and now it trades 100 to 200 contracts each day.

While euros, yen, British pounds, Swiss Francs, Australian dollars, and Canadian dollars account for 85 percent of CME Group's transaction volumes, yuan-linked products account for a very small portion of the exchange's business at the moment, he noted.

However, yuan derivatives will be a much more significant part of CME Group's volume since the trade flows are expected to increase significantly in the next few years.

Buy-side players including hedging funds account for 60 percent of the volume of offshore RMB futures on CME, institutional investors take up 30 percent and banks hold the rest, Sammann said.