R5FX launches renminbi connection with Shanghai Clearing

Connect will enable Shanghai banks to trade spot FX offshore via R5FX

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Cross-trading: Connect will work with eight Shanghai-based banks initially

Emerging markets trading platform R5FX is launching a cross-trading connection with Shanghai Clearing House (SHCH), which will allow local Chinese banks to trade foreign exchange offshore.

Until now, banks based in China have had little opportunity to trade foreign exchange offshore. With R5-SHCH Connect, many of these banks will trade FX offshore for the first time, while those already doing so will be able to expand their counterparty and liquidity base.

When the scheme launches, eight Chinese banks located in Shanghai will begin trading via Connect, and this will be extended to an additional 17 banks in Shanghai and others across China in due course.

Initially, banks will be able to trade spot FX in Hong Kong dollars, euro, sterling and the US dollar, with derivatives FX products such as forwards and swaps following if demand warrants it.

Other currencies will follow suit; namely, the offshore renminbi, yen, Swiss franc, and the Australian, New Zealand, Singapore and Canadian dollars.

Connect reinforces London’s leading position in global FX, in RMB trading and in fintech
R5FX

“Connect reinforces London’s leading position in global FX, in RMB trading and in fintech,” reads a statement issued by R5FX. “It reflects the rise of the renminbi as a global currency, and demonstrates an opening of financial markets through the next stage of China’s international financial reform by introducing new financial innovation as part of the Belt and Road initiative.”

Ahead of the launch, R5 added several G10 currencies to the platform to enable the Chinese banks using it to access the FX market in London. The banks can also benefit from a choice of clearing, netting and settlement methods provided by R5, which will direct their trades to SHCH, an interbank clearing house for Chinese financial products.

The hope is for Connect to serve as a catalyst for further growth and reform in China, and in due course to enhance access to the renminbi on the international stage.

R5FX expects volumes to reach $2 billion on a daily basis in the early days of the scheme.

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