Another Nail In The Dollar's Coffin: CME Launching Renminbi Futures On August 22

Remember when the dollar reigned supreme, and nobody cared about that joke of a currency, the Chinese Renminbi? Neither do we. And neither does the CME, which just announced it is launching USD/CNY futures, which will be available in standard and E-micro sizes beginning August 22. Put otherwise, with one fell swoop the CME will now allow one to transform liability risk, credit and maturity of underlying assets from one currency to another, while on margin (granted, exposed to the same margin shenanigans that make silver bulls scream blood murder every time the CME's name is mentioned). And the CME is just the beginning of what soon will allow everyone to denominate their liability exposure into the Chinese currency. In the process, the dollar lost yet another battle, as it continues to lose the war.

From the CME:

The Chinese renminbi – or RMB – has experienced rapid growth in deposit and trading volume both on- and off-shore. The renminbi is now being used for business transactions in multiple off-shore locations which include Hong Kong, Singapore, Korea, Australia and other areas around the world. Accordingly, a need for capital risk management tools for the Chinese currency has emerged.

To address this need, CME Group has developed USD/RMB futures. These contracts will be offered in standard and E-micro sizes and will be quoted in conventional interbank FX market terms.

    Standard contracts: Based on USD 100,000
    E-micro contracts: 1/10 the standard contract size, based on USD 10,000

Key features:

  •     Cash-settled to the spot value of the interbank convention, RMB per USD, as published by the People's Bank of China (PBC)
  •     Daily pays and collects calculated in RMB, then translated into USDs
  •     Renminbi rate is displayed on Reuters SAEC page
  •     Available alongside the CME's existing RMB/USD contract quoted in the American convention

Full contract details:

Contract Specifications: Standard and E-micro USD/RMB Futures**
Contract Size Standard Futures based on 100,000 USD (≈ RMB 648,300);
E-micro Futures
based on 10,000 USD (≈ RMB 64,830)
Tick Size Standard Contract: Outrights quoted in 0.0010 RMB per USD = 100 RMB (≈ USD $15.42) per contract; calendar spreads quoted in 0.0005 RMB per USD = 50 RMB (≈ USD $7.71) per contract
E-micro Contract: Outrights quoted in 0.0010 RMB per USD = 10 RMB (≈ USD $1.54) per contract
RMB-Denominated Daily pays and collects calculated in RMB but translated into USD by reference to daily PBC fixing rate, and banked in USD
CME Globex Trading Hours Sundays through Fridays: 5:00 p.m.-4:00 p.m. (Central Time, CT) the next day. On Friday CME Globex platform closes at 4:00 p.m. and reopens Sunday at 5:00 p.m.
CME ClearPort Trading Hours Sundays through Fridays: 6:00 p.m. – 5:15 p.m. (5:00 p.m. – 4:15 p.m. Chicago Time/CT) with a 45–minute break each day beginning at 5:15 p.m. (4:15 p.m. CT)
Months Standard: 13 consecutive calendar months (Jan, Feb, Mar, Apr, May, Jun, Jul, Aug, Sep, Oct, Nov, Dec) plus 8 March quarterly months (3-year maturity range)

12 consecutive calendar months (Jan, Feb, Mar, Apr, May, Jun, Jul, Aug, Sep, Oct, Nov, Dec)
Last Trading Day Trading ceases at 9:00 am Beijing time on 1st Beijing business day immediately preceding 3rd Wednesday of contract month
NDF-Style Cash Settlement Final Settlement Price (FSP) at "Chinese renminbi per U.S. dollar" fixing rate published by PBC at 9:15 am Beijing time on Reuters SAEC page opposite "USDCNY="
Strike Prices NA
Exercise/Assignment NA
Position Limits / Position Accountability USD/RMB futures converted to notional equivalents of 6,000 CME full-sized RMB/USD futures contracts (=6 billion RMB) for Position Accountability trigger level; and no more than 2,000 full-sized RMB/USD futures contracts (=2 billion RMB) for Position Limit in the spot month on or after the day one week prior to the termination of trading day.**

Positions for the same account holder will be aggregated across standard-sized and E-micros futures with 10 E-micros equaling 1 standard-sized contract.

**For example, if the appropriate RMB per USD rate is 6.4830 RMB per USD ("prior day's Regular Trading Hours settlement") , then one 100,000 USD standard futures contract would count as 648,300 RMB against the PA trigger level of 6 billion RMB. Similarly, one 10,000 USD E-micro futures contract would count as 64,830 RMB against the 2 billion RMB Spot Position Limit.
CME Globex Codes Standard: CNY
Block Trade Eligibility and Minimum Standard: Yes. Minimum Quantity: 50
Not eligible for block trades.
EFRP Eligibility Yes
Exchange Rule These contracts are listed with, and subject to, the rules and regulations of CME.
*Note that this process implies the possibility that the cumulative USD denominated pays and collects may not sum to zero even where trade is "scratched." I.e., a customer may buy (sell) and subsequently sell (buy) a contract at the same price quoted in terms of RMB per USD. However, contingent upon the path taken by exchange rates while the trade is open, these USD denominated cash flows, in total, may diverge somewhat from zero.

**Options on USD/RMB (CNY) futures contracts will be offered for trading at a later date.