OREANDA-NEWS. April 21, 2011. On the first day of RMB-foreign currency option trading on the inter-bank foreign exchange market, ICBC successfully carried out a number of RMB-foreign currency option trading with Bank of China (BOC), a source from ICBC told reporters recently, reported the press-centre of ICBC.

It is said that a RMB-foreign currency option is a derivative contract where the buyer can choose to exercise the right agreed in the contract to exchange RMB into a foreign currency on a specified date. On the prerequisite of agreeing upon volume and price, the right is to either sell RMB and buy a foreign currency, or sell a foreign currency and buy RMB, depending on the types of options. On February 16 of this year, the State Administration of Foreign Exchange officially approved the China Foreign Exchange Trade System to start RMB-foreign currency option trading on the inter-bank foreign exchange market on April 1. This comes as three types of RMB-foreign currency derivative products have already been launched, namely forward, foreign exchange swaps and currency swaps, marking another significant move by China Foreign Exchange Trade System to further diversify foreign exchange trading and provide more tools for enterprises and banks to hedge exchange rate risks.

Industry insiders point out that the launch of option trading on the inter-bank foreign exchange market is of great significance. It not only means that a complete trading system for exchange rate derivatives has preliminarily established in our country, it also promotes the popularity and application of core trading technologies for derivatives such as dynamic hedging in China's commercial banks, which will give full play to the function of derivatives in value discovery. Besides, ICBC's RMB-foreign currency option trading with BOC on the first day of the launch is of prominent exemplary significance, marking that China's RMB-foreign currency option trading has officially entered the substantive stage of operation and at the same time laying a solid foundation for starting RMB-foreign currency option trading for customers in the next phase.

Relevant people-in-charge with both ICBC and BOC say that the two banks will, as always, stick to promoting innovation and delivering services, make full use of their professional advantages, and play a positive role in boosting trading activities on the inter-bank foreign exchange market and providing customers with high quality risk-hedging services under the precondition of strictly abiding by regulatory provisions.