Retail Renminbi Non-deliverable Forward Contracts

The Treasury Markets Forum of Hong Kong (TMF) announced today (Monday) the launch of retail renminbi non-deliverable forward (RMB NDF) contracts.

Following recent reforms to the RMB exchange rate regime, there is an increasing demand from small and medium-sized enterprises (SMEs) and other retail customers for easily accessible financial instruments which can help them hedge their RMB exposures.

The TMF formed a Working Group in August to explore the possibility of developing a RMB NDF product to cater for this demand. The Working Group comprises members drawn from the TMF Sub-Committees and is chaired by Ms Anita Fung, the Chairman of the Market and Product Development Sub-Committee. The Working Group completed its work in mid-September and recommends the introduction of a retail RMB NDF contract with standardisation in both product features and documentation.

To facilitate easy access to the product by SMEs and other retail customers, the retail RMB NDF contracts will be offered at a minimum size of US$10,000. Initially the contracts will be offered in five tenors: 1, 2, 3, 6 and 12 months. The TMF has also published a standard document setting out the offering terms for the contract, including the settlement arrangements of the contracts. The product specifications and documentation will be reviewed from time to time by the TMF, which may recommend changes to the product features as the market develops further.

"The launch of the retail RMB NDF contracts is a clear example of how product innovation driven by coordinated efforts through the TMF helps to cater for market needs that arise from time to time," said Mr Y K Choi, the Chairman of the TMF.

"We believe that the introduction of the retail RMB NDF contracts will provide a useful tool for SMEs, particularly those with investments in the Mainland, and other retail customers to manage their currency risk exposures," said Ms Anita Fung, the Chairman of the TMF's Market and Product Development Sub-Committee.

The seven banks represented on the Working Group have agreed to adopt the terms published by the TMF and are expected to launch the retail RMB NDF product in early November. All other banks are welcome to join the programme and adopt the document published by the TMF. Interested banks may approach the TMF Secretariat for further details. Further information on the retail RMB NDF product can be found on the TMF website (http://www.tmf.org.hk).

Treasury Markets Forum of Hong Kong
26 September 2005