Chicago Merc Now Takes RMB for Futures Trading

The interesting thing about the United States at the current time is that it's the new Italy. Whereas Italy would continually add zeros to the dollar/lira exchange rate to compensate for a lack of competitiveness via depreciation, that route is no longer there since it joined the Eurozone. The US, however, is not similarly compelled to act in a responsible way. Hence its installation of a helicopter dropper as Fed chairman who plays a lead role in bombarding the world economy with dollar emissions in what has come to be known as "international currency war."

Step by step, however, alternatives are emerging. The dollar certainly is suspect as a store of value, "strong dollar" policy pronouncement hilarity aside. A particularly interesting new application now lies in the realm of futures trading. It turns out that the largest US futures exchanges are now allowing the use of RMB for margin. As you know, the Chinese have been experimenting with internationalizing the use of its currency for currency exchange, trade settlement and other purposes in financial centres such as Hong Kong and Singapore. Not one to be left behind, London is lobbying PRC authorities to some extent for similar privileges as the PRC experiments with making its monies more readily available.

So it is probably of little surprise that another heartland of casino capitalism has jumped the gun in allowing yuan held by clients in Hong Kong-based accounts to be used for topping up trading accounts. Welcome to the future...

CME Group Inc, operator of the world's leading energy, grains and precious metals markets, said it will start accepting the Chinese currency traded in the offshore market as collateral on all its exchange-traded futures products. By expanding its list of collateral to include the offshore yuan, or "CNH" as it is popularly known, a Hong Kong depositor can now use CNH deposits to take positions in a variety of futures contracts traded on the CME, a new avenue for using these funds.

Jeremy Hughes, a spokesman at the CME, said the exchange will cap the amount of CNH it would accept at $100 million. CME and European lender HSBC have built the operational framework enabling HSBC Hong Kong to hold CNH deposits from CME clients and to use these deposits as collateral, it said.

As futures trading goes global, so too should the currencies that may be used:

CME is rapidly increasing its China-focused business. In August, it launched dollar-yuan futures for investors wanting to bet on the yuan's direction. It even launched a micro-version of the yuan futures to attract more clients.

CME, which operates the Chicago Mercantile Exchange, the Chicago Board of Trade, and the New York Mercantile Exchange, gets the bulk of its revenue from trading fees and sales of market data. Volume originating outside the U.S. now accounts for 22 percent of all CME Group volume, it said in a statement.

China's move to liberalise the offshore yuan market has picked up since its launch in June 2010. At the end of October, total yuan deposits in Hong Kong banks swelled to more than 600 billion yuan, representing nearly 10 percent of all deposits in Hong Kong banks, compared with less than 1 percent in January 2010.

So goes the story in the new age (RMB) as folks become more reluctant to hold sewage ($).