1. From the perspective of market trading platform, the foreign exchange market should be market-oriented. However, the market positioning of China Foreign Exchange Trading Center has yet to be clarified.
In the development process of the whole foreign exchange market, how to position China Foreign Exchange Trading Center and what functions it undertakes will not only directly affect the development of the foreign exchange trading center itself, but also affect the development of the foreign exchange market.
China Foreign Exchange Trading Center adopted a membership-based organizational system in its early days. Members pay membership fees and set up a board of directors, which is actually a self-regulatory organization with a certain market intermediary color. However, with the development of 10, the market color of foreign exchange trading center is fading, and it has become a directly affiliated institution of regulatory agencies. From the market point of view, this is at least not an improvement.
According to international experience, how to reasonably define the functions of market entities such as China Foreign Exchange Trading Center is often an important factor affecting the development of the foreign exchange market. Judging from the development of South Korea's foreign exchange market, Seoul Foreign Exchange Market Committee is an autonomous committee established by financial institutions participating in the inter-bank foreign exchange market in South Korea, and it is a very important self-regulatory organization. South Korean foreign exchange brokers, banks and the government also participated in this Committee, which promoted the development of the Korean foreign exchange market through marketization. In the development of foreign exchange market in Taiwan Province Province, China, there is also a foreign exchange trading center with unclear initial positioning, which has not obtained legal status since its establishment. This trading center consists of five commercial banks in Taiwan Province Province, and other banks can participate as members. With the development of the foreign exchange market in Taiwan Province Province, the trading center has further defined its functions as a broker, which has promoted the development of the trading center and the foreign exchange market in Taiwan Province Province. It can be seen that a market-oriented and clearly positioned trading platform plays a very important role in the development of the foreign exchange market. In the foreign exchange market, commercial banks and other market players have a better understanding of market demand and can respond more sensitively to the market. Introducing commercial banks to participate in the operation of China Foreign Exchange Trading Center in a market-oriented way is undoubtedly beneficial to the development of the foreign exchange market.
Second, from the perspective of market competition, the central bank should gradually reduce large-scale continuous direct market intervention and begin to improve market competition in the foreign exchange market.
The large-scale intervention of the central bank into the market has made the central bank the largest market maker in the foreign exchange market at present, and market regulators and supervisors have become the largest trading subjects passively at this time, which is not conducive to the improvement of the efficiency of the foreign exchange market, but also reduces the degree of competition in the foreign exchange market and the flexibility and room for manoeuvre for the central bank to indirectly regulate the foreign exchange market.
From a technical point of view, although the intermediary service of euro/RMB trading and foreign currency borrowing has been introduced in the foreign exchange market in recent two years, the trading time has been extended and the statistics of foreign exchange settlement and sale have been put on the line, the de facto peg to the US dollar, the stable exchange rate and the large-scale direct intervention of the central bank make market participants think that the RMB exchange rate is guaranteed by the government, which directly restricts the development of the foreign exchange market.
Judging from the structure of market entities, there is an obvious defect in the current foreign exchange market, that is, the distribution of trading volume among trading entities is too concentrated. Among the more than 300 members of the inter-bank foreign exchange market, only a few banks occupy a highly monopolized position. The homogeneity of market subjects and the concentration of transaction distribution may be beneficial to the direct supervision of regulatory agencies, but due to the convergence of commercial banks' transaction behavior and the concentration of dominant commercial banks' transactions, on the one hand, the central bank has a greater passive intervention in the market.
From the international experience, the central bank's intervention in the foreign exchange market should be carried out indirectly through market entities such as commercial banks, and the cost of continuous large-scale direct intervention actually tends to rise. Therefore, it is an important driving force for the development of the foreign exchange market that the central bank gradually reduces the continuous direct intervention, introduces diversified market players and allows intermediary institutions such as commercial banks to play a more active role. The central bank's intervention in the market should be carried out by influencing the trading behavior of commercial banks on the basis of fully grasping the market trading information, which is more efficient.
The degree of market competition is not high, which is also manifested in the lack of market liquidity. At present, China's foreign exchange market lacks the liquidity of trading products other than US dollars, which directly restricts the development of the market. One rule of the foreign exchange market is that liquidity creates liquidity. A product with good liquidity will attract more institutions to participate in the transaction, which in turn will increase the liquidity of the product. Judging from the current market environment, improving the degree of market competition and further improving the liquidity of the market is an important link to promote the development of the foreign exchange market. It is necessary to gradually introduce the market maker system, and conditionally introduce the market maker system under the condition of liberalizing bilateral transactions. Approved market-making banks constantly quote the price and amount of foreign exchange they are willing to buy and sell within the prescribed market-making limit according to their own judgment, so as to provide market liquidity, without emphasizing the real background of foreign exchange settlement and sale. At the same time, we should attract more market players, such as insurance companies and other non-bank financial institutions to enter the market, and try to pilot money brokerage companies; Gradually liberalize the restrictions of the principle of real needs, and on the basis of increasing the trading subjects with different trading motives, allow market subjects to conduct financial transactions without real needs background under the premise of strictly controlling risks.
Third, from the perspective of the main market structure, we should provide more trading options for small and medium-sized financial institutions and change their passive position in the current foreign exchange market structure.
Regardless of the international market or the domestic market, an important trend of the development of the foreign exchange market is the centralization and non-intermediation of transactions, and large banks dominate the operation process of the whole foreign exchange market. At the same time, the market participation of a large number of small and medium-sized financial institutions is also increasing. These customers have a small domestic network, but because they have less experience in international business and low credit rating, it is difficult to trade through the international foreign exchange market. They hope to trade and close their positions through the platform built by China Foreign Exchange Trading Center.
At present, there are four kinds of currency exchange in the inter-bank market corresponding to the main trading varieties of the bank's foreign exchange settlement and sale counter, all of which are quoted in foreign currencies against RMB. At this time, the cross exchange rate between different foreign currencies and the exchange rate difference between the international foreign exchange market are easy to appear. Some large banks that can participate in international foreign exchange market transactions often put the US dollar transactions with high liquidity in the domestic market in the domestic inter-bank market, and at the same time convert the positions such as euro, Japanese yen and Hong Kong dollar into US dollars through overseas markets. Small and medium-sized financial institutions can only passively accept the price difference between domestic and foreign markets. Therefore, at the current stage of development, China Foreign Exchange Trading Center should actively take small and medium-sized financial institutions as one of its main service targets under the premise of controlling their credit risks.
At present, in order to change the passive market structure of small and medium-sized financial institutions, we can consider introducing cross-quotations such as USD against Euro, or change the existing quotation methods, and unify the benchmark prices of four currencies into USD benchmark prices. The prices between other major currencies and RMB are calculated by USD benchmark prices and the prices between USD and major international currencies in the international foreign exchange market.
Four, from the perspective of market function positioning, should promote the foreign exchange market from the real demand-oriented foreign exchange settlement and sale position to the foreign exchange market covering real demand transactions and financial transactions.
Under the current capital control conditions, based on the principle of real demand for transactions, the inter-bank foreign exchange market is actually more of a flat market for foreign exchange settlement and sale positions, mainly to balance the positions generated from foreign exchange settlement and sale transactions with designated foreign exchange banks under the foreign exchange settlement and sale system. Under this market structure, commercial banks buy and sell foreign exchange in the foreign exchange market not for commercial needs or profit purposes, but for fulfilling the regulations of the State Administration of Foreign Exchange on the management of turnover positions in foreign exchange settlement and sale. When the market supply and demand are unbalanced, the central bank can only passively enter the market to buy and sell foreign exchange. On the other hand, with the development of the international foreign exchange market, banks, non-bank financial institutions, large multinational enterprises and central banks have entered the foreign exchange market for different trading purposes, and the ratio of actual demand actually tends to decline, while the trading volume of financial transactions has exceeded 70% of the total trading volume of the market. Therefore, gradually reforming the current foreign exchange settlement and sale system, cautiously relaxing capital account control and expanding financial transactions in the foreign exchange market are one of the important directions to improve the current foreign exchange market activity.
A problem corresponding to the market function positioning is that from the perspective of market product structure, new trading varieties represented by inter-bank forward trading should be gradually introduced. At present, there are only four spot trading varieties in the domestic foreign exchange market, lacking forward trading and other trading varieties. The four banks that carry out forward settlement and sale of foreign exchange can only make a flat offer through the spot market and the borrowing market. The inter-bank foreign exchange market lacks forward trading market, and the formation of exchange rate is only based on the current foreign exchange supply and demand, so it is difficult to quickly reflect the market's expectation of future exchange rate. Therefore, we should actively expand new trading varieties, including forward and foreign currency pairs.
Relevant international experience shows that as long as there is a realistic demand for hedging transactions, there will inevitably be corresponding hedging transactions, but under different regulatory conditions, whether these new varieties are onshore or offshore markets. At present, RMB forward trading is very active in overseas markets such as Hongkong, which is also the external driving force for the development of forward trading in China's onshore market. At present, the development of China's forward foreign exchange market is limited to the forward foreign exchange business in the retail market, including only import and export trade hedging and debt service hedging, based entirely on the principle of real needs. The inter-bank foreign exchange market should gradually introduce forward foreign exchange transactions to provide experience for withdrawing from swaps, futures and options in the future. In contrast, the forward position management of commercial banks can also be introduced, and the corresponding forward business leveling mechanism can be established through China Foreign Exchange Trading Center to provide forward foreign exchange hedging mechanism for financial institutions.