Merc builds path into Asian market with conference in China


The Chicago Mercantile Exchange will co-host a conference in Shanghai next month as part of an effort to eventually have Chinese banks and other companies use the Merc's contracts to protect against swings in interest rates or currencies. The conference with the Shanghai Stock Exchange and the Shanghai Futures Exchange will educate government officials in futures trading, said Richard Redding, the Merc's managing director for products. China, Asia's biggest economy after Japan, last month shifted its decade-long peg of the yuan, a denomination of the renminbi, away from the dollar to a basket of currencies. This week it allowed companies that export or import at least $2 billion a year to trade yuan directly with banks, a step that allows hedging. "This is a tangible, visible educational effort to get Chinese regulators, government officials -- some of the futures commission merchants will be there, too -- to begin, when the time is appropriate, trading our products and other products as well," Redding said. "Asia is an attractive market to us." Futures are agreements to buy or sell assets at a set date and price, and investors use them to guard, or hedge, against fluctuations in the value of those assets. They are a type of derivative, which is a broader category of financial obligations whose value is derived from interest rates, debt, equities, commodities or other assets. "The promise of China's continued economic expansion offers valuable opportunities to develop its derivatives markets for hedging and risk management of financial exposures," Merc Chief Executive Craig Donohue wrote in the debut issue of the exchange's CME magazine last month. "Derivatives markets are essential adjuncts to fuel China's further economic growth."