OREANDA-NEWS. December 02, 2014. The first day the China Foreign Exchange Trading System & National Interbank Funding Center (CFETS) formally launched the RMB standard interest rate derivatives, ICBC smoothly closed the first deals in such products, with the volume of quotations and transactions leading the market, and played an active role in boosting trading activity and supporting the development of the standard interest rate derivatives market.

The standard interest rate derivatives launched this time were a major innovation in the trading and investment tools in the interest rate market. Different from the general interest rate swaps and forward rate agreements, standard interest rate derivatives involve standardized settings about the key elements of interest rate derivatives, including contract month, last trading day, trading hours, delivery date, delivery method, quotation method, unit quotation volume and unit change point. Market participants may directly conduct transactions according to the preset contract.

The first four standard interest rate derivatives launched this time include 1-month standard overnight index swaps, 3-month standard Shibor1W interest rate swaps, 3-month standard seven-day repo interest rate swaps, and 3-month standard Shibor3M forward rate agreements. Commercial banks can not only diversify the trading and investment tools in the interest rate market by trading in RMB standard interest rate derivatives, but also provide clients with interest rate risk management solutions better aligned with their loan or bond structures by designing standard interest rate derivatives portfolios.

According to an ICBC official, as the biggest RMB market maker in China's interbank market, the Bank will actively engage in two-way quoting for standard interest rate swaps, constantly enhance its capability of pricing interest rate derivatives, and strive to meet customers' demand for short-term interest rate risk management. Meanwhile, the Bank will also learn from the trading strategies for short-term interest rate products adopted by the mature markets overseas, and prudently engage in low-risk carry trades.