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Press from R5 Shanghai Connect London Launch Event Dec 2017

Posted on 9th January 2018 in R5FX Ltd

Media Coverage – R5-SHCH Connect (updated December 20th)

Euromoney

https://www.euromoney.com/article/b15y90hdc0zhm0/chinese-banks-yearn-to-trade-offshore-renminbi

Chinese banks yearn to trade offshore renminbi

By: Paul Golden Published on: Thursday, December 07, 2017

Analysts’ confidence that there is untapped demand from Chinese banks to trade offshore RMB is good news for R5, which last week announced a joint venture with Shanghai Clearing House designed to connect these institutions to the London FX market.

China’s ongoing acquisition of offshore assets and increasing influence in many parts of the world have created a need for its domestic banks as the primary financiers of a growth in demand by Chinese banks to more actively trade renminbi in all centres.

According to Wendy Tao, director of prime services at brokerage Invast Global, easier access to offshore RMB trading would reduce the discrepancy between the use of its currency and China’s status as the world’s second-largest economy.

“To an extent this would increase the involvement of marginal participants, but more significantly it would substantially improve liquidity as both existing and new participants would increase their trading in renminbi,” she says.

Arin Ray, an analyst in the securities and investments group at Celent, also accepts that easier access to offshore renminbi trading should lead to an increase in the number of market participants and improve liquidity.

To date, demand from Chinese-based financial institutions to promote and participate in offshore RMB trading has been focused on the main Asian trading centres of Hong Kong and Singapore. R5 hopes that its formation of an electronic marketplace in partnership with Shanghai Clearing House will see more of this business done in London.

R5-SHCH Connect will provide connectivity for banks located in Shanghai – followed by those across China – to directly trade FX in London. Demand from Chinese banks for equal access to G10 spot means the service will go live with eight Chinese banks and will launch with HKD, EUR, GBP and USD spot.

The first phase is likely to go live just before Christmas.

Second phase

Euromoney understands that – subject to approval by the People’s Bank of China (PBoC) – the second phase of the project, which will cover CNH as well as JPY, CHF, AUD, NZD, SGD and CAD, will go live in the first quarter of 2018.

The service uses the R5 platform, which means that – again subject to approval by the PBoC – it will be able to offer onshore Chinese banks access to a wider range of emerging-market currencies. Plans for future expansion also include extending access to products such as forwards, swaps and bonds.

Initial trading expectations are for $2 billion in renminbi transactions per day. There are a further 17 banks in Shanghai that R5-SHCH Connect hopes to onboard and an additional 30 financial trading institutions will be targeted in a second phase.

The service is aimed at providing Chinese banks with access to deeper liquidity and better pricing for G10 currencies, explains R5 CEO Jon Vollemaere.

“The traditional model of bilateral credit doesn’t work well for Chinese banks,” he says. “R5-SHCH Connect offers a new central credit and clearing model which provides them with equal access to the more liquid markets. “With onshore and offshore Chinese banks accessing the offshore renminbi market, alongside G10, we expect liquidity to increase significantly.”

The leading Chinese banks are expanding offshore and trade actively in all major currencies – not only in euros, US dollars and sterling, but also yen and Australian and New Zealand dollars, says Invast Global’s Tao, adding: “With Chinese companies active in many parts of the world, domestic banks will continue to have a strong appetite for all major currencies.”

According to Vollemaere, the fact that many of the Chinese banks that have committed to using the marketplace have little or no profile in London will inevitably boost liquidity.

“The onshore and offshore Chinese banks have a huge appetite to trade the G10 currencies,” he adds. “They want to support their clients as they buy and sell goods around the world, and they want equal access.

“There is a large onshore demand for dollars well beyond the import of goods and services as well as demand for currency exchange around the Bond Connect and Stock Connect schemes.”

Strict controls

However, China retains strict controls over its currency, intervening in the market as and when it feels needed, which can impact investors’ views and desire for trading in RMB products.

Even if the market were to grow, it is likely that would happen gradually and over the longer term, says Celent’s Ray.  “The Chinese authorities’ focus is to have its currency movements influenced by real economic activities – primarily trade settlement, but also investment and hedging activities – and arbitrage or speculative activities are discouraged; though the line between hedging and speculation is not always clear,” he says.

 

Bloomberg Intelligence chief Asia economist Tom Orlik sounds an equally cautionary note, observing that the onshore market represents a notable challenge to offshore trading. “As China takes steps to open its bond market to institutional investors, the need for – and appeal of – holding yuan offshore is diminished,” he concludes. “You can see that in the sharp drop in yuan deposits in Hong Kong.”

Profit&Loss

https://www.profit-loss.com/articles/news/exchanges-clearing/r5fx-shanghai-clearing-house-to-launch-fx-trading-platform

R5FX, Shanghai Clearing House to Launch FX Trading Platform

December 1st 2017

R5FX Shanghai Clearing House SCH RMB ChinaShare to More

R5FX and the Shanghai Clearing House (SHCH) will launch a new electronic marketplace next month, in a move which will enable Chinese banks to directly trade offshore RMB with London for the first time.

The platform, called Connect, is due to go-live on 18 December – following confirmation from the People’s Bank of China. Eight Chinese banks will be participating from launch, with further banks and institutions to be added at a later date.

The products available for trading in this first phase will be USD/HKD, GBP/USD and EUR/USD. Profit & Loss understands CNH and the remaining G10 currency pairs may also be added towards the end of Q1 2018.

“This partnership is all about connecting Chinese banks with the London FX market and giving them equal access to deep liquidity,” says Jon Vollemaere, CEO and founder of R5. “Connect opens up the London FX market to Chinese banks and our central credit and clearing model means they can trade with an expanded group of counterparties and trade on the best prices.”

Shanghai-based banks will start using the platform from phase one, followed by further banks across China. There are a further 17 banks based in Shanghai which are also expected to be onboarded to Connect – and a further 30 institutions which R5 aims to add in the platform’s second phase.

They will also be able to use R5’s central clearing and credit platform, R5C3, with R5 directing these trades to SHCH for settlement.

Connect is an additional service specifically designed for Chinese banks, with the potential to also offer these institutions access to R5’s suite of emerging market currencies in the future.

Initial volumes in RMB transactions are expected to be in the region of USD 2 billion. R5 and SHCH also plan to extend the offering to include swaps, forwards and bonds, while also branching out into additional RMB offshore markets such as Hong Kong, Singapore and New York.

“R5 and SHCH are working in partnership to deliver true innovation,” Vollemaere adds. “Not only is this expected to increase liquidity in the global FX market, but it will also strengthen London’s position as a major offshore RMB centre.”

The news was announced at SHCH’s inaugural London seminar on cross-border FX this week, which was co-hosted with R5 and the China Construction Bank.

Mei Jin, chief representative from the People’s Bank of China (PBoC) European Representative Office, says she hopes the new Connect service initiative would act as a high-speed link between China and London’s FX markets while also further promoting RMB internalisation.

“China continues to open up,” Jin adds. “In the last several years, the PBoC has taken effective steps to reduce FX controls and promote renminbi convertibility in a prudent manner.”

Ben Cackett, head of global exports and investment for the City of London also welcomed the new clearing service, adding that the model of conducting cross-border transactions on the London based e-platfrom and clearing centrally by SHCH will give “full play to the advantages of the infrastructures in both countries and satisfying the FX trading and clearing needs of each side”.

FX Week

https://www.fxweek.com/global/emerging-markets/3384661/r5fx-launches-renminbi-connection-with-shanghai-clearing

R5FX launches renminbi connection with Shanghai Clearing

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

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 will connect to the platform.

Markets Media

http://marketsmedia.com/london-fx-market-connects-shanghai/

London FX Market Connects to Shanghai

Shanghai Clearing House has formed R5-SHCH Connect, a joint venture emerging markets foreign exchange trading marketplace R5 to provide connectivity for Chinese banks to directly trade foreign exchange in London.

Shanghai Clearing House was established in 2009 by the People’s Bank of China as a qualified central counterparty and one of the central securities depositories in China. In March this year the Shanghai Clearing House opened a representative office in London, adding to the 30 Chinese financial institutions in The City of London, in order to develop financial cooperation and partnership between the two countries.

Jin Mei, chief representative of the People’s Bank in Europe, said at a conference in London last  week that the UK in the second largest offshore market for Chinese renminbi and the government wants to develop foreign exchange infrastructure.

Jon Vollemaere, chief executive of R5, said at the conference that the firm has spent the spent the last few years moving emerging market FX trades from telephones onto screens through the use of APIs, algorithms and aggregators.

“The joint venture will speed up electronification of FX in domestic China, and firms will not only catch up with, but will overtake the West,” he added.

Shen Wei, deputy general manager at Shanghai Clearing House said the CCP chose to launch  the venture with R5 because the electronic platform is authorised by the Financial Conduct Authority, the UK regulator, and it accommodates existing market practices.

She said: “Clearing will reduce settlement risk. There is increasing demand from Chinese firms who cannot access the offshore RMB market as they who do not have the necessary credit lines.”

Chen Leilei, general manager of the product development department at Shanghai Clearing House, said at the conference that the joint venture will accelerate international use of RMB, especially with the financial needs of China’s One Belt, One Road initiative to develop trade infrastructure across Asia. Institutions already trading in London will benefit from additional counterparties and deeper liquidity provided by new Chinese entrants, and Shanghai Clearing House will gain from both international clients and global expansion

R5 will stream prices for anonymous spot trading and the SCH becomes the central counterparty, reducing the need to use credit lines.

Chen continued that the venture will launch on 18 December with an initial group of eight Chinese banks trading spot Hong Kong dollars, euros, sterling and US dollars. “We will then widen the currency pairs and eventually add other FX derivatives,” she added.

There are a further 17 banks in Shanghai who could also join Connect and an additional 30 financial trading institutions which are slated to be added in a second phase.

Expansion plans for the future include extending access to new products such  as forwards, swaps and bonds, and adding the offshore RMB markets in Hong Kong, Singapore and New York. R5 said it expects around $2bn in RMB transactions per day when Connect launches.

 

China Daily

http://www.chinadaily.com.cn/bizchina/2017-11/30/content_35130597.htm

Shanghai Clearing House to start operations in London

By Cecily Liu in London | China Daily | Updated: 2017-11-30 07:52

Shanghai Clearing House will launch China’s first-ever cross border foreign exchange clearing platform with a London partner next month to support China’s further capital market liberalization and renminbi internationalization.

Announcing the news in London on Tuesday, Shanghai Clearing House said it will launch the platform in partnership with the London-based R5FX, which is a clearing platform for emerging markets’ foreign exchange trade.

While Shanghai Clearing House will provide trade clearing infrastructure within China, R5FX will provide clearing infrastructure in London and other international markets in which it operates.

The new platform is seen as a vote of confidence in London’s status as a leading international financial hub despite uncertainties over the United Kingdom’s impending exit from the European Union.

It builds on increasingly strong China-UK financial collaboration during the two countries’ “golden era” of relations, which began with President Xi Jinping’s state visit to the UK in October 2015.

“We have chosen London because it is a leading international foreign exchange hub with 40 percent of global foreign exchange trading,” said Cheng Leilei, general manager of product development department at Shanghai Clearing House.

Effectively, the new platform allows China’s onshore banks to trade with overseas banks. Initially they can trade currencies, but over time products such as bonds and derivatives could be added.

Without the platform, Chinese and overseas banks would need to invest significant time and efforts into finding counter-parties willing to accept their trades, negotiate the prices of the trades and bear counter-party risks.

The new platform acts as a market place that creates the introduction and transparently help them to price the trades, bear the counter-party risks, and provide additional liquidity.

Jin Mei, the People’s Bank of China’s chief representative in Europe, said the new service can help to increase the renminbi’s further offshore trading and investment activities, which will also bolster China’s capital market liberalization.

“China has decided to continue opening up. In the last several years, the PBOC has taken effective steps to reduce forex control and promote renminbi convertibility in a prudent manner,” Jin said.

Jinny Yan, chief China economist at ICBC Standard Bank, said: “The new service will help grow London’s momentum of offshore renminbi trading and investment.”

London is the biggest offshore renminbi foreign exchange trading hub outside Asia.

Data for the first quarter of 2017 collected by the Society for Worldwide Interbank Financial Telecommunication showed that 36.3 percent of global offshore renminbi exchange transactions were conducted through London.

Xinhua

Xinhua News Agency, London, November 29 (Reporter Wen Xiqiang) The cross-border liquidation seminar on foreign exchange transactions was held in London, England recently, and attendees conducted an in-depth discussion on how to promote the internationalization of the renminbi.

Jin Mei, chief representative of the People’s Bank of China’s European Office, said that London, as the world’s major offshore financial market and the second largest offshore renminbi market, can play an important role in the “Belt and Road”. For example, the “One Belt and One Road” project will generate huge financing needs. London can give full play to the advantages of its financial centers and help make the renminbi the investment currency. She hoped that the liquidation of the central counterparty in cross-border foreign exchange transactions being developed by the relevant agencies in China and the United Kingdom would promote the linkage between the financial markets in the two countries and serve the participants in the global foreign exchange market and help the internationalization of the RMB.

City of London officials Carter said cross-border foreign exchange transactions in London local trading platform, and the Shanghai Clearing House to provide centralized clearing services will help give play to the advantages of the two countries ‘financial infrastructure to meet the two countries’ financial institutions for foreign exchange transactions and liquidation Demand, and promote cooperation between financial institutions of the two countries.

Shen Wei, deputy general manager of Shanghai Clearing House, said that in recent years, more and more Chinese elements have emerged in the development of global financial markets and the two-way opening up of China’s financial market has accelerated. On the one hand, the ways in which foreign-funded institutions can invest in the Chinese inter-bank market and the Chinese stock exchange market continue to expand. Various supporting mechanisms such as policy regulation, laws and taxation in the Chinese market continue to improve. On the other hand, Chinese institutions “go global” Interest in more and more, more extensive and in-depth participation in clearing transactions in global financial markets.

He said that the two-way opening up of China’s financial market requires the interconnection of financial infrastructure both at home and abroad and the need to open up more convenient and efficient transaction clearing channels for market participants. The cross-border liquidation of foreign exchange transactions prepared by Shanghai Clearing House and UK R5FX platform is a new exploration of this path.

Cross-border Foreign Exchange Transactions The clearing of central counterparties refers to the operation of Shanghai Clearing House providing clearing-house services to its counterparts on cross-border foreign exchange transactions on the R5FX platform in the United Kingdom. The participants in this business include not only the institutions in China, but also foreign commercial institutions with foreign exchange trading capabilities.

FX168

FX168 Financial News (Hong Kong) Shanghai Clearing House and UK Foreign Exchange Electronic Platform R5FX Plans to Introduce Central Counter-party Clearing Business for Cross-border Foreign Exchange Transactions.

It is understood that the clearing of cross-border foreign exchange operations of the central counterparty refers to the supernatant on the R5FX platform for the UK to reach a specific cross-border foreign exchange transactions provide clearing services center counterparty business.

Business participants include not only domestic institutions in China, but also foreign commercial institutions with foreign exchange trading capabilities. The initial offering includes three currencies, the U.S. dollar against the Hong Kong dollar, the British pound and the Euro (1.1838, 0.0013, 0.11%) against the U.S. dollar, the future According to market demand, we will gradually expand the currency and include derivative products.

Redback Reporter

Shanghai Clearing House Cross Border FX Seminar

On November 28th R5 and the Shanghai Clearing House hosted the Cross-Border FX Seminar, where they announced the formation of Connect, an electronic marketplace, which enables banks in China and offshore Chinese branches to trade G10 currencies and offshore RMB in the London FX market, recognised as the leading centre for FX trading.

R5-SHCH Connect is a joint venture between R5, the emerging markets FX trading marketplace, and the Shanghai Clearing House, the interbank clearinghouse, established to clear and settle China’s financial products. It is the result of the deepening ties between the UK and China in the area of capital markets.

The R5-SHCH Connect marketplace will provide connectivity for banks located in China to directly trade FX in London, including the offshore RMB. By working in cooperation, R5 and the Shanghai Clearing House are demonstrating the close economic ties between the UK and China. R5-SHCH Connect reinforces London’s leading position in global FX, in RMB trading, and in FinTech.

It reflects the rise of the RMB 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.

To date, Banks based in China have not been able to trade the offshore RMB easily, but R5-SHCH Connect market for the first time. Institutions already trading in the London market will benefit from additional counterparties and deeper liquidity, provided by new Chinese entrants, and the Shanghai Clearing House will benefit from both international clients and global expansion. The joint venture is expected to deepen the offshore RMB market, and further cement London’s leading position. By providing increased access it is highly likely that more institutions will trade RMB, enhancing liquidity and lowering costs.

Finance Magnates

Shanghai Clearing House Partners with R5FX for Cross Border Clearing

Shanghai Clearing House Partners with R5FX for Cross Border Clearing

The new platform helps Chinese and overseas banks to get access to a more liquid and transparent marketplace.

In what is a first in China, and yet another step in the ongoing process of renminbi internationalization, the Shanghai Clearing House is launching the first cross-border foreign exchange clearing platform.

The project is expected to be deployed next month. London-based R5FX is actively participating in the development and realization of the first Chinese cross-border foreign exchange clearing solution. The company already has expertise in the field with its clearing platform for EMFX traders.

The Shanghai Clearing House will deploy trade clearing infrastructure within mainland China, as R5FX opens access to its clearing infrastructure in London and several other international markets where it is operating like Hong Kong, Singapore, and New York.

Commenting on the project, the general manager of product development department at Shanghai Clearing House, Cheng Leilei, said: “We have chosen London because it is a leading international foreign exchange hub with 40 percent of global foreign exchange trading.”

The new trading platform enables onshore Chinese banks to trade with overseas banks. The initial phase of the product deployment will enable foreign exchange transactions with bonds and derivatives down the pipeline.

Elaborating on the milestone and its importance for renminbi internationalization, the People’s Bank of China’s chief representative in Europe, Jin Mei, said: “China has decided to continue opening up. In the last several years, the PBOC has taken effective steps to reduce foreign exchange controls and prudently promote renminbi convertibility.”

London continues to be a big hub for offshore renminbi trading with its title as the biggest venue for such trades outside of Asia. According to the Society for Worldwide Interbank Financial Telecommunication, during the first quarter of 2017, 36.3 percent of global offshore renminbi exchange transactions were executed via London.

ECNS.cn

http://www.ecns.cn/business/2017/11-29/282608.shtml

New platform in UK to boost RMB internationalization

Next month, Shanghai Clearing House will launch China’s first cross-border foreign exchange clearing platform with a London partner to support China’s further capital market liberalization and renminbi internationalization.

Announcing the news in London Tuesday, Shanghai Clearing House said it will launch the platform in partnership with the London-based R5FX, which is a clearing platform for emerging markets’ foreign exchange trade.

While Shanghai Clearing House will provide trade clearing infrastructure within China, R5FX will provide clearing infrastructure in London and other international markets in which it operates.

The new platform is seen as a vote of confidence in London’s status as a leading international financial hub despite Brexit uncertainties. It builds on increasingly strong China-UK financial collaboration during this “golden era” in the two countries’ relationship, which began with President Xi Jinping’s state visit to the UK in October 2015.

“We have chosen London because it is a leading international foreign exchange hub with 40 percent of global foreign exchange trading,” said Chen Leilei, general manager of the product development department at Shanghai Clearing House.

Effectively, the new platform allows China’s onshore banks to trade with overseas banks. Initially they can trade currencies, but over time products such as bonds and derivatives could be added.

Without the platform, Chinese and overseas banks would need to invest significant time and efforts into finding counterparties willing to accept their trades, negotiating the prices of the trades and bearing counterparty risks.

The new platform acts as a marketplace that creates an introduction and transparently helps them to price the trades, bear the counterparty risks, and provide additional liquidity.

Jin Mei, the People’s Bank of China’s chief representative in Europe, said the new service can help to increase the renminbi’s further offshore trading and investment activities, which will also bolster China’s capital market liberalization.

“China has decided to continue opening up. In the last several years, the PBOC has taken effective steps to reduce forex control and promote renminbi convertibility in a prudent manner,” Jin said.

Jinny Yan, chief China economist at ICBC Standard Bank, said the new service will help to grow London’s momentum in offshore renminbi trading and investment.

Currently London is the biggest offshore renminbi foreign exchange trading hub outside Asia. Data for the first quarter of 2017 collected by the Society for Worldwide Interbank Financial Telecommunication showed that 36.3 percent of global offshore renminbi exchange transactions were conducted through London.

Hu Jinming, co-head of treasury at the China Construction Bank London Branch, the officially appointed renminbi clearing bank in the UK, said the bank will provide settlement support for the new Shanghai Clearing House service. In addition, it also looks to participate in this new cross-border foreign exchange market as a trading party.

Founded in 2009, Shanghai Clearing House clears bonds, interest rates, foreign exchange and exchange rates, and shipping and commodity derivatives. In March it established its first overseas office in London.

Sina

http://finance.sina.com.cn/money/forex/hbfx/2017-11-30/doc-ifyphtze2765304.shtml

http://big5.xinhuanet.com/gate/big5/news.xinhuanet.com/fortune/2017-11/29/c_1122032325.htm