SHANGHAI, Jan 4 (Reuters) - China’s Shanghai International Energy Exchange (INE) is set to revise its settlement and delivery rules to enable the usage of government bonds as margins used in trade, it said on Monday, seeking public opinion on the revisions.
The exchange did not say when the revisions would be effective, but specified that the government bonds used as margins should have a total face value of at least one million yuan ($154,748), it said in a statement released on its website.
Margins are deposits paid by investors in futures markets to an exchange or clearing house to cover the risk of default by that investor.
“Government bonds are high-quality collaterals given their stable value and strong liquidity,” said the exchange.
“Accepting government bonds as margin will expand the coverage of collateralizable securities, lower the trading cost of investors, and increase the utilization of funds, thus improving market operation.”
China is promoting the global use of yuan-denominated bonds as collateral in a move to guard against rising Sino-U.S. tensions. In September, its main interbank market clearing house announced a joint white paper on the use of yuan-denominated bonds as collateral in offshore markets.
The INE is host to several Chinese commodities futures contracts that are open to foreign investors for trade. Its products which are yuan-denominated so far include crude oil, TSR 20 rubber, low-sulphur fuel oil and most recently bonded copper.
$1 = 6.4621 Chinese yuan renminbi Reporting by Emily Chow; editing by Emelia Sithole-Matarise
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