If we examine it from the perspective of trading technology and market transaction scale, the development of China's foreign exchange market has indeed achieved remarkable results in the past 10 years. Compared with the new development of the international foreign exchange market, the trading method of my country's inter-bank foreign exchange market is that traders quote prices separately, and the system centrally matches transactions according to the principles of time priority and price priority. From a technical perspective, it should be said to be in line with the development trend of the international foreign exchange market. ; The transaction scale of China’s inter-bank foreign exchange market has also doubled year after year. However, if we look at it from the perspective of market system development and market structure, China's foreign exchange market is still in its infancy, and there is basically no new progress in areas such as new product innovation. This trend is especially reflected in China's foreign exchange transactions. The positioning of the center, etc.
From the perspective of a market trading platform, the foreign exchange market platform should be market-oriented. At present, the market positioning of the China Foreign Exchange Trading Center needs to be clarified. In the entire development process of the foreign exchange market, how the China Foreign Exchange Trading Center should be positioned and what functions it should undertake will directly affect the next development of the foreign exchange trading center itself, as well as the next development of the foreign exchange market.
In the early days of its establishment, the China Foreign Exchange Trading Center adopted a membership-based organizational system. Members paid membership fees and established a board of directors. In fact, it was a self-regulatory organization with a certain market intermediary character. With the development of the past 10 years, the market color of the foreign exchange trading center has been diluted, and it has become a direct subordinate agency of the regulatory agency. From the perspective of market development, at least this cannot be regarded as an improvement.
From international experience, how to reasonably define the functions and positioning of market entities such as the China Foreign Exchange Trading Center has often become an important factor affecting the development of the foreign exchange market. Judging from the development of the Korean foreign exchange market, the Seoul Foreign Exchange Market Committee, an autonomous committee established by Korean financial institutions participating in the inter-bank foreign exchange market, is a very important self-regulatory organization. Korean foreign exchange brokers, the Bank of Korea and the government also participate This committee promotes the development of the Korean foreign exchange market through a market-oriented approach. In the development of the foreign exchange market in Taiwan Province of China, there was also a foreign exchange trading center with unclear positioning in the early stage. It has not obtained legal status since its establishment. This trading center is composed of five Taiwanese commercial banks (Bank of Taiwan, China, First, Huanan, Changhua ), other banks can participate as members; with the development of Taiwan's foreign exchange market, the status of the trading center further clarifies the functions of brokers, promoting the development of the trading center and the development of Taiwan's foreign exchange market. 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, market entities such as commercial banks have a better understanding of market needs and can respond more sensitively to the market. Introducing commercial banks into the operation of the China Foreign Exchange Trading Center through a market-oriented approach will undoubtedly benefit the development of the foreign exchange market. develop.
From the perspective of the degree of transaction competition in the market, the central bank should gradually reduce the large-scale continuous direct market intervention and start to improve the degree of market competition in the foreign exchange market. At this time, the market regulators and regulators passively and directly become the largest trading entities, which is not conducive to the improvement of the efficiency of the foreign exchange market in the medium to long term, and also reduces the degree of market competition in the foreign exchange market, and also reduces the flexibility and maneuverability of the central bank in indirect regulation of the foreign exchange market. room.
From a technical perspective, although the foreign exchange market has launched Euro/RMB transactions and foreign currency lending intermediary services in the past two years, transaction hours have been extended, and statistics on foreign exchange settlement and sales have been online, the de facto thorn in the side of exchange rate policy has been The US dollar, stable exchange rate, and large-scale direct intervention by the central bank have led market participants to believe that the RMB exchange rate is guaranteed by the government, which directly restricts the development of the foreign exchange market.
From the perspective of the structure of market entities, an obvious flaw in the current foreign exchange market is that 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 monopolistic position. The homogeneity of market entities and the concentration of transaction distribution may be conducive to direct supervision by regulatory agencies. However, due to the convergence of commercial bank transaction behaviors and the transactions of dominant commercial banks, The central bank's concentration on the one hand puts greater pressure on the central bank to passively intervene in the market, and on the other hand it also makes the market flexibility of exchange rate formation need to be improved.
Based on international experience, the central bank's intervention in the foreign exchange market should be carried out indirectly through market entities such as commercial banks. The cost of sustained large-scale direct intervention actually tends to rise. Therefore, the central bank gradually reduces its continuous direct intervention, introduces diversified market entities, and allows commercial banks and other intermediaries to play a more active role. This is an important driving force for the development of the foreign exchange market; the central bank's intervention in the market should be based on comprehensive control of the market. Based on market transaction information, it can be more efficient by influencing the trading behavior of commercial banks.
The level of market competition is not high, which is also reflected in the lack of market liquidity. Currently, there is a lack of liquidity in transactions other than the U.S. dollar in China's foreign exchange market, which directly restricts the development of the market. A rule in the foreign exchange market is that liquidity creates liquidity. A product with good liquidity will attract more institutions to participate in transactions, and the participation of institutions in turn increases the liquidity of the product.
Judging from the current market environment, increasing the level of market competition and thereby increasing market liquidity is an important step in promoting the development of the foreign exchange market. It is necessary to gradually introduce the market maker system, and under the conditions of liberalizing bilateral transactions, introduce the market maker system when conditions permit. Approved market-making banks, within the prescribed market-making limits and based on their own judgment, continuously quote the price and amount they are willing to buy and sell foreign exchange to provide market liquidity, without having to emphasize their real background in foreign exchange settlement and sales. At the same time, more market entities should also be attracted, such as insurance companies and other non-bank financial institutions to enter the market, and try to conduct pilot projects of currency brokerage companies; gradually relax the restrictions of the principle of actual demand, and on the basis of increasing transaction entities with different transaction motivations , allowing market participants to conduct financial transactions without actual background on the premise of strictly controlling risks.
From the perspective of market entity structure, more trading options should be provided for small and medium-sized financial institutions, and the passive position of small and medium-sized financial institutions in the current foreign exchange market structure should be changed. Whether it is the international market or the domestic market, the development of the foreign exchange market An important trend is the centralization and disintermediation of transactions. Large banks increasingly dominate the operation of the entire foreign exchange market. At the same time, the market participation of a large number of small and medium-sized financial institutions is increasing. These customers have small domestic networks, but because they have less experience in participating in international business and have low credit ratings, it is difficult to buy and sell through the international foreign exchange market. It is hoped that Close positions by trading through the platform built by the China Foreign Exchange Trading Center.
Currently, corresponding to the main trading varieties at bank foreign exchange settlement and sales counters, there are four currencies in the inter-bank market, all of which are quoted against RMB. At this time, cross exchange rates between different foreign currencies and differences in exchange rates between international foreign exchange markets are prone to occur. Some large banks that can participate in international foreign exchange market transactions often place transactions of US dollars with high liquidity in the domestic market in domestic Inter-bank market transactions, and the corresponding euro, Japanese yen and Hong Kong dollar positions are converted into US dollar positions through foreign markets, small and medium-sized financial institutions can only passively accept the price differences between domestic and foreign markets. Therefore, at the current stage of development, the China Foreign Exchange Trading Center should actively serve small and medium-sized financial institutions as one of its main service targets on the premise of controlling the credit risks of small and medium-sized financial institutions.
Currently, in order to change the passive market structure of small and medium-sized financial institutions, we can either consider launching cross-trading quotations such as the U.S. dollar against the euro, or change the existing quotation method and combine the transactions of the four currencies. The benchmark price is unified to the US dollar benchmark price, and the prices between other major currencies and the RMB are calculated based on the US dollar benchmark price and the prices between the US dollar and major international currencies in the international foreign exchange market.
From the perspective of market function positioning, the current foreign exchange market should be promoted from a covering market for foreign exchange settlement and sales positions based on actual demand to a foreign exchange market that covers both real demand transactions and financial transactions. Under the current capital control conditions, based on the principle of actual demand for transactions, China's inter-bank foreign exchange market is actually more of a covering market for foreign exchange settlement and sales positions, mainly to coordinate the balance of foreign exchange designated banks under the foreign exchange settlement and sales system. Positions resulting from foreign exchange settlement and sales transactions. In this market structure, commercial banks do not buy and sell foreign exchange in the foreign exchange market based on commercial needs or profit-making purposes. Their trading behavior is to fulfill the management regulations of the State Administration of Foreign Exchange on the settlement and sale of foreign exchange turnover positions. When there is an imbalance between market supply and demand, the central bank can only passively enter the market to buy and sell foreign exchange. Looking back at the development of the international foreign exchange market, banks, non-bank financial institutions, large multinational enterprises and central banks enter the foreign exchange market for different transaction purposes. The ratio of actual demand actually tends to decline, while the transaction volume of financial transactions Accounting for more than 70% of the total market transaction volume, therefore, gradually reforming the foreign exchange settlement and sales system, prudently relaxing capital account controls, and expanding financial transactions in the foreign exchange market are one of the important directions to increase the current activity of the foreign exchange market.
A problem corresponding to the market function positioning is that from the current market product structure, new trading varieties represented by inter-bank forward transactions should be gradually introduced. At present, there are only four spot trading varieties in the domestic foreign exchange market, and there is a lack of forward trading and other trading varieties. The four banks that carry out forward foreign exchange settlement and sales can only conduct settlement through the spot market and the lending market. The inter-bank foreign exchange market lacks a forward trading market. The exchange rate formation is only based on the current supply and demand of foreign exchange, and it is difficult to quickly reflect the market's expectations for future exchange rates. expected. Therefore, new trading varieties including forwards and foreign currency pairs should be actively expanded.
Relevant international experience shows that as long as there is a realistic demand for hedging transactions, corresponding varieties of hedging transactions will inevitably be produced. However, under different control conditions, what exactly will these new varieties be? The onshore market is still the offshore market. Currently, forward transactions related to the RMB are very active in Hong Kong and overseas markets, which is also an external driving force for the development of forward transactions in China's onshore market. At present, the development of my country's forward foreign exchange market is limited to forward foreign exchange business in the retail market, which only includes import and export trade risk hedging and principal and interest payment hedging, and is entirely based on the principle of actual needs. Forward foreign exchange transactions should be gradually introduced in the inter-bank foreign exchange market and provide experience for the future withdrawal of swaps, futures, options and other businesses. In contrast, forward position management of commercial banks can also be launched, and a corresponding forward business closing mechanism can be established through the China Foreign Exchange Trading Center to provide a forward foreign exchange hedging mechanism for financial institutions.