China Construction Bank (CCB) and CME Group, a U.S.-based derivatives market place, signed a Memorandum of Understanding (MoU) on Monday to support their further cooperation in the fields of renminbi (RMB) or Chinese yuan settling and benchmark silver pricing.
Under the MoU, CME Group is now able to offer offshore Chinese renminbi (CNH) futures contracts with physical delivery in London for the first time, which will be offered via CME Europe, the group's European exchange. They will be supported by CCB, which is the sole People's Bank of China designated clearing bank of RMB in London.
According to CME Group, physically deliverable futures contracts for U.S. dollar/CNH and EUR/CNH have been available on CME Europe since the European exchange launched in April 2014, delivering in Hong Kong, China. Now that CME Clearing Europe, which provides clearing services for CME Europe, intends to work with CCB, CME Europe plans to amend these contracts so that physical delivery will take place in London, bringing cost and time-saving advantages to market users.
Meanwhile, CCB will be able to participate in the London Silver Pricing, as well as to facilitate the trading of CME Group products for CCB's customers in China. Therefore, CCB will become the first Chinese bank to participate in the fixing of the London Silver Pricing, as well as the seventh bank in the pricing.
Wang Hongzhang, CCB's chairman, said: "CCB wants to support the development of the offshore RMB market in London through our engagement with an innovative financial institution such as CME Group."
William Knottenbelt, senior managing director and head of international, CME Group said: "The ability to transact during London hours is of paramount importance to those institutions who value flexibility in managing their positions in markets where prices can move sharply in short periods of time."
"CME Group and CCB have shared a strong desire to promote RMB liquidity in London. We are committed to building out the necessary infrastructure and RMB products for a thriving marketplace as well as extending our partnership into other areas," added Knottenbelt.
