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China : ICBC Completes the First Batch of RMB/Foreign Exchange Put Option Transactions for Corporate Clients.

ICBC has recently completed RMB/foreign exchange put option transactions for multiple corporate clients, becoming one of the first commercial banks in China offering such business.

RMB/foreign exchange options trading means RMB/foreign exchange option contracts entered into between banks and customers, where the buyer has the right to deal in foreign exchange options in the agreed currency and direction and at the agreed price and amount to the other party in a certain period in future or at a specified time, by paying an option premium. Customers that conduct put options can gain from the option premium and lower internal financial costs. The launch of RMB/foreign exchange put option transactions can not only provide customers with more diversified products to hedge against exchange rate risks, but also promote the development of RMB/foreign exchange derivative products, which will invigorate derivatives trading in the interbank foreign exchange market, activate the price discovery function of the financial market, and further facilitate the reform of the exchange rate formation mechanism in China.

Since the State Administration of Foreign Exchange ("SAFE") launched the RMB/foreign exchange call options in 2011, ICBC has become one of the first Chinese banks to roll out the service, and the RMB/foreign exchange options business has maintained the momentum for rapid and healthy development. The RMB/foreign exchange put options launched by ICBC under the policy arrangement of SAFE is a new instrument for corporate clients to hedge against exchange rate risks, following the rollout of forward purchase/sale of foreign currencies, RMB/oreign exchange swaps, and RMB/foreign exchange call options. It may further meet the diversified needs of businesses to hedge against exchange rate risks.

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Publication:Mena Report
Geographic Code:9CHIN
Date:Aug 26, 2014
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