China to Allow Non-Banks to Trade in Interbank FX Market

In what appears as an attempt at loosening its vice-like grip on the country’s financial markets, Beijing has announced that it will allow non-banks such as insurance firms, trust institutions and brokerages to participate in the interbank FX market.

The move is also the most significant attempt at liberalizing China’s foreign-exchange market after the central bank widened the yuan’s trading band in March. Presently, only banks are allowed to participate in the interbank FX market.

Authorities are requesting feedback on its draft proposal that seeks to permit non-banks to participate in the FX derivatives and spot markets, reported Reuters.

When contacted, the spokespersons at the State Administration of Foreign Exchange, which regulates China’s FX market, were unavailable for comments.

China is gradually implementing various reforms aimed at liberalizing its financial markets. In March, it allowed the yuan to trade 2 percent up or down from its daily benchmark level, which is usually fixed by the People’s Bank of China early every day.

The country’s cabinet, The State Council, promised in May to implement a series of capital market reforms, such as pushing for local governments to issue bonds directly, removing restrictions and easing the procedure of IPO approval.

Meanwhile, Jesper Bruun-Olsen, who was the Managing Director for North East Asia at OANDA, has left the broker. Bruun-Olsen started working with OANDA in December 2012 in the role of Managing Director of OANDA Japan. He was responsible for driving growth in Japan, a market notable for difficult FX market conditions over the past 18 months.