Bank of China set to join Seoul's yuan futures market

The Seoul branch of the Bank of China, a major Chinese commercial bank, may soon begin offering futures contracts on the Seoul bourse, informed sources said Monday, a move that could help significantly boost the local market.

The local branch of the Chinese bank has already submitted a request to South Korea's financial watchdog, seeking permission to sell futures contracts on the South Korean stock market, according to the market sources, who spoke on condition of anonymity.

The state watchdog, Financial Services Commission, was soon expected to issue preliminary permission after its eight-member review committee recently concluded the bank was fit to handle such trade, they added.

The Korea Exchange, the operator of the Seoul bourse, opened a yuan futures market late last year, but the daily turnover currently remains low, averaging about 20-30 deals and a combined value of about 3 million yuan ($455,000) a day.

Such a low turnover was largely attributed to local investors and businesses' strong preference for the U.S. greenback as their settlement currency.

KRX officials also say the little amount currently traded in yuan futures are mostly exchanged between securities firms that themselves offer yuan futures contracts. They are Daishin Securities, eBest Investment & Securities and Mirae Asset Daewoo Securities.

"The market is still in its early stage, but as China continues to promote yuan as an international reserve currency, our companies' use of Chinese yuan as their payment currency will grow and so will the futures market," a KRX official said. (Yonhap)