China Foreign Exchange Trading Center: Building Global RMB Trading Platform

20 years ago, in Zhongshan, Dongyi Road, the Bund, 15, a nearly century old neoclassical architecture, ushered in a new institution, the China foreign exchange trading center and the national interbank lending center, which organized interbank market pactions, conducted central currency policy, supported macro financial decisions and built infrastructure, and gradually became the trading platform and pricing center for RMB related products.

Over the past 20 years, the trading center has undergone two rounds of financial crisis, and has grown and matured through all kinds of hardships.

The interbank market volume grew by an average of 52% per year.

In 2013, the market volume was 284 trillion and 700 billion yuan, supporting half of China's major financial markets.

At the same time, the interbank market membership has been growing, and has now covered almost all kinds of financial institutions.

At present, the trading center has reached more than 2000 legal entities, more than 7000 trading accounts, more than 20 thousand information and regulatory users, with an average daily turnover of more than 1 trillion yuan.

Using advanced electronic information technology, relying on the private network and the Internet, the trading center has built up the basic platform for the spot and derivative pactions, post processing, post paction, information, supervision and monetary policy operation services in three markets of interbank foreign exchange, currency and bond, generating daily market benchmark of RMB exchange rate intermediate price, Shanghai interbank offered rate Shibor, loan base interest rate (LPR), repurchase fixed interest rate, bond index, yield curve and so on.

It has created a good market platform for further improving the RMB exchange rate formation mechanism, promoting market-oriented interest rate reform and RMB internationalization.

The head of the trading center believes that the key to the development of the 20 years is the idea of "a variety of technical means, a variety of trading ways to meet the needs of different levels of the market".

Birth: there is a centralized platform in the foreign exchange market.

Before 1994, China adopted the dual track exchange rate system, which not only kept the official exchange rate and the market exchange rate for a long time, but also changed the foreign exchange market.

In 1994, China reformed the foreign exchange management system, implemented the system of foreign exchange settlement and sale, and the single, managed floating exchange rate system based on market supply and demand, and established a unified interbank foreign exchange market. The trading center came into being, and China's foreign exchange market has centralized platform and unified price since then.

The trading center is directly affiliated to the head office of the people's Bank of China.

The main function is to provide paction, information, benchmarking, training and other services for interbank lending market, bond market and foreign exchange market; provide services for the central bank's monetary policy operation and pmission, undertake daily monitoring of market pactions, calculate and release market exchange rates and interest rates, and carry out other business approved by the central bank.

The establishment of interbank market has not only laid the foundation of the floating exchange rate system, but also promoted the smooth realization of RMB current account convertibility.

In 1996, the people's Bank of China wrote to the International Monetary Fund, formally announcing that RMB realized current account convertibility in December 1st of that year.

The successful experience of interbank foreign exchange market has become a new template for China's financial market construction.

In 1996, in order to solve the problem of bank lending and lending at that time, the people's Bank of China decided to establish a national interbank lending center on the basis of the foreign exchange trading center. The lending market has been on the right track of steady development. In 1997, in order to solve the problem of bank funds entering the stock market through the exchange bond market, the State Council called for the establishment of an interbank bond market on the basis of the interbank lending center, and the bond market has entered a fast developing Speedway since then.

The standardized development of interbank lending and repurchase business has resulted in a market based lending rate and repurchase interest rate, providing an important platform for promoting the marketization of interest rates.

At the same time, the continuous enrichment of the interbank bond market and the continuous activity of the paction not only support the development of the real economy, but also produce a relatively complete bond yield curve, which is not only an important indicator of inflation expectations, but also the pricing basis of many financial products.

Growth: the rapid development of interbank market

On the road of growth and development, the trading center focuses on the strategic objectives of building the main platform and pricing center for RMB related products trading, and meets various market demands by various means of technology and various pactions. It persists in innovating products, businesses, technologies and mechanisms, and realizes the rapid growth of the interbank market.

In the early days of the establishment of the trading center in 1994, there were only two foreign exchange pactions in the US dollar and Hong Kong dollar, and 20 years later, the exchange rate of RMB foreign exchange market has expanded from two to 11. The trading products have also expanded from single spot to forward, swap, term, currency swap and other derivatives, and the foreign currency of the 9 currency pairs such as euro / dollar has been added to the market.

In the RMB market, based on the money market and bond market, the trading center has gradually launched buyout buyback, bond forward, interest rate swap, bond lending, forward interest rate agreement, credit risk mitigation certificate and other trading tools.

As the market demand continues to diversify, the service content of the trading center is also improving.

It has launched the market clearing services such as net liquidation, electronic trading of interest rate swaps, confirmation and sterilisation, and confirmation of foreign exchange pactions.

In addition, the trading center has the courage to try new ways of service, such as the creation of China's money market magazine, the establishment of a platform for market information exchange, and the joint venture of money brokerage company and financial information technology companies to meet the needs of market segmentation.

It is the core and foundation of the existence of the market. The trading center has a deep understanding of this, and has never ceased the pace of upgrading the system.

Among them, the foreign exchange trading platform has gone through 2001 editions of the new version of the foreign exchange trading system, the 2007 edition of the new generation foreign exchange trading system, and the 2009 version of the foreign exchange trading system (phase three), and so on. The local currency trading system has also been upgraded from the new version of the local currency trading system (ET03 version) to the 2009 edition of the "new generation of local currency system".

At present, the trading center is integrating the construction of a multi asset, multi-level and comprehensive new generation trading platform.

In addition to its own system upgrade, the trading center is also brave enough to shoulder the heavy responsibility of building the market infrastructure. It has established financial industry standards such as IMIX, basic data element and application programming interface (API), so as to effectively enhance the core competitiveness of China's trading platform.

At the same time, the trading center constantly nurture the market benchmark system to promote market pparency and improve market liquidity.

In addition to the middle price of the RMB exchange rate and Shanghai interbank offered rate (Shibor), the real estate / closed end yield curve, the bond valuation curve, the interest rate swap fixed / closing curve, and the four categories of more than 100 indexes, such as the foreign exchange swap curve, the US dollar implicit interest rate curve, the foreign exchange forward curve, the currency swap curve, the RMB implied volatility curve, the loan basic interest rate (LPR), and so on, have formed the benchmark index system to comprehensively cover the foreign currency market.

In the tide of economic globalization, since 2004, the trading center has joined the SWIFT organization to improve the efficiency of liquidation, to cooperate with Reuters in developing foreign currency trading system, and to cooperate with the Chicago commodity exchange (CME) in exploring new business models such as "directive forwarding".

The pace of opening to the outside market has also accelerated.

In 2004, BOC Hongkong and BOC Macao joined the interbank foreign exchange market, and the trading center network and services extended to overseas for the first time.

Since then, the interbank market has welcomed the influx of foreign institutions. As of the end of August 2014, 73 overseas institutions, 41 RQFII and 11 QFII have been allowed to enter the inter-bank bond market.

"Trading center was set up at the time of the exchange rate system reform. It has been subjected to two rounds of financial crisis. After twenty years of reform and opening up and development and innovation, it has been the basic platform for carrying out pactions, information and regulation in the inter bank market."

The head of the foreign exchange trading center regrets that practice has proved that the development of the interbank market in the past twenty years is highly forward-looking and coincides with the latest changes in the international financial market.

Since the current financial crisis, the OTC market envisaged in the financial market reform of developed economies has organized pactions, centralized liquidation, and paction reporting system. Most of them have been implemented in the interbank market of China.

In the face of future development, the head of the foreign exchange trading center pointed out that the the third Plenary Session of the 18th CPC Central Committee resolution of the party clearly put forward "developing and standardizing the bond market and raising the proportion of direct financing", "improving the formation mechanism of RMB exchange rate marketization, accelerating the marketization of interest rates, and improving the yield curve of treasury bonds reflecting market supply and demand."

We should promote two-way opening of the capital market, improve the convertibility of cross-border capital and financial pactions in an orderly way, establish and improve the foreign debt and capital flow management system under the framework of macro Prudential Management, accelerate the realization of convertibility of Renminbi capital items "," strengthen the construction of financial infrastructure, ensure the safe and efficient operation of financial markets and overall stability ". These expressions provide a broad space for the trading center to indicate the way forward.

According to the introduction, looking forward to the future, faced with the ongoing financial reform and increasingly fierce market competition, the trading center will continue to promote product innovation, service innovation and business innovation, consolidate the core competitiveness of the trading platform, further improve the market operation of the operation of the institution, and actively explore the internationalization of the interbank market.

The trading center aims to build the global "RMB trading platform and pricing center", and seize the three main lines of "system building, product and service innovation, and talent team building" to ensure the effective pmission of monetary policy in the process of RMB internationalization, and provide technical support and market basis for the security of the national financial market.