CME Group To Accept Offshore Yuan As Collateral For Futures Trades

CME Group Inc. (CME) will accept offshore Chinese yuan as collateral on all futures products it clears, the exchange operator said Monday.

CME said HSBC Hong Kong will serve as its first clearing custodian in the Far East. CME customers will be able to hold yuan traded offshore, also known as CNH, at HSBC and use those deposits as collateral for futures trades.

"As our business in Asia grows, we are looking at ways to provide services that fulfill the needs of our increasingly diverse customer base," said Kim Taylor, president of CME Clearing.

It's the latest effort by Chicago-based CME, a major player in commodities futures, to expand its presence in the $4 trillion-a-day currency markets. Yuan deposits in Hong Kong have swelled over the past year as China has permitted greater yuan trade offshore, but deposits shrank in October for the first time in two years.

CME just weeks ago rolled out new yuan futures contracts modeled on non-deliverable forward contracts traded among banks and investment firms. The exchange operator is still in the process of getting systems into place that will allow for automated trading of those contracts, after which it expects volume to pick up, a CME Group spokesman said.

-By Martin Vaughan, Dow Jones Newswires; +65 6415 4033; martin.vaughan@dowjones.com

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