The Chinese Yuan will start trading on the Merc

I'm not sure if this has already been widespread, but today it was announced that the Chicago Mercantile Exchange will start trading contracts on the Chinese yuan as of August 27, this year. Who in their right mind would take the sales side?

You're assuming that:

Do you really follow the currency market? a. The exchange rate will not change before the launch. You have missed something quite important in recent months. Here are the last three moves of the USD/CNY in just three days: The yuan closed to 7,9987 against the dollar (vs. 7,9962 in the official market

Most of those who think without having read the CME statement are the same ones who cry when the market takes them away. You don�t need to have a PhD to understand that if a contract is launched into a stock exchange like Chicago it is because it is validated and there are interested counterparts. Who will take the other side? Because any bank, fund or institutional trader who understands the dynamics of flows with China. Here it�s not about �who would be so crazy?� it�s about understanding the role of speculation and coverage in the markets.

I find it incredible how some keep repeating the same arguments of 2005, as if the market were static. China is opening up its financial system at fast paces and allowing its currency to cotice in a Western market is part of that process. Of course it will not be perfect at first, but if you expect total guarantees to participate, then you don�t understand what it is like to operate in emerging markets. That�s where the opportunities are, not in what is already liquid and predictable.

The idea that "no one is going to want to buy yuan" is ridiculous. There are thousands of reasons to operate that crossing: arbitration, exposure coverage in imports/exports, pure speculation... does no one remember how the euro started? The futures contract of the yuan is not designed only for retailers. It is intended for institutional participants who already have direct or indirect exposure to the Chinese market. And believe me, there are many more of those who think.

Let's see if we understand it: the CME does not launch products blindly. There are feasibility studies, consultations with institutional operators and internal liquidity test. If they announce a contract on the yuan it is because there is real commercial interest behind it. At first there may be wide spreads and shallowness, but that changes quickly if there is demand. It happened with the bitcoin at the CME. It will pass with the yuan. Time and demand will put everything in place.

I find it good to have caution, but to question absolutely everything before even the product is available is simply defeatism. Trading consists of evaluating opportunities, not discarding them by system. No one is saying that it will be the most liquid pair overnight. But if you specialize in frontier assets, that�s where you have the advantage. The one who expects everything to be ready and served, stays behind.

Many who criticize this safe launch don�t operate even EUR/USD without fear. If you�re not willing to assume uncertainty, you�d better stick to state bonds. And that�s not safe today. The yuan is integrating into global financial flows. Do you really think the big ones won�t want an additional instrument to manage it? Don�t underestimate the speed with which the game changes.

I agree that there are still regulatory barriers and certain doubts regarding the arbitration between spot and future. But that�s not enough reason to say it�s unfeasible. Many contracts have started less clearly and today are essential. The market builds liquidity. It�s not born with it. If a useful product is offered, liquidity arrives. Especially if there are banks and funds interested in covering currency risk with China.

Interesting what you're talking about swaps and the cost of carrying. But don't forget that in China real rates are managed indirectly, as mentioned by another user: through reserve requirements and not nominal interest rates. That makes arbitration more complex, but also more profitable for those who know how to read BoC's monetary policy. Here it's not about replicating the Western model. It's about understanding how China plays its game.

What bothers me most is the tone of superiority of some comments. What makes you think that you see something that the CME, hedge funds, banks and institutional traders didn�t see? If it were so obvious that this doesn�t work, they wouldn�t be investing resources in its launch. So lower the ego a bit and analyze the fundamentals with more humility.

It is true that contracts about the yuan are not going to be free of manipulation or interference from the BoC, but does that not happen with any other currency? USD/JPY has been influenced by BoJ interventions for years and no one stops operating it. The market is not clean, it is functional. And if you can detect intervention patterns, you can operate them. The key is to adapt your approach, not to demand ideal conditions that do not exist.

The arguments that deny the viability of this contract seem to have come out of 2010. The SDR already has the yuan included, multiple central banks keep it in reserves and the digital yuan is in advanced phase. The world is moving towards a multipolar model, whether you like it or not. And that includes more tools to manage the yuan exposure. This is just the beginning.

I am surprised that no one has mentioned the potential of this contract for companies trading with Asia. Being able to cover themselves directly in CME with a regulated product is a giant step for those who previously could only do it via Hong Kong or Chinese banks. This type of tools are not only for speculative traders. They are useful for CFOs, corporate treasurers and risk managers. As their profits spread, liquidity will arrive alone.

I would like to see what those who said that �nobody would want to touch that contract� say within a year when the average daily volume begins to climb. It is always easy to criticize from ignorance. Yuan is a key piece of the new economic order. Having financial instruments to operate with it is not a fashion, it is a necessity.

That �contracts can be delayed or cancelled� is true... but unlikely if it comes from an entity like the CME. We�re not talking about a second-rate exchange in some tax haven. If something announced the CME with date and specifications, you can be sure it�s all set. Reputation is worth more than any failed experiment.

The problem is not whether or not the yuan should be in international markets. The problem is whether you, as a trader, have the approach to take advantage of it or just stay waiting for external validation. Those who make money are the ones who take the initiative, not the ones who expect the perfect signal. Here�s a new instrument, backed by the most serious derivative infrastructure on the planet. Are you really going to ignore it?

I would love for those who criticize this to show us their history of operations or their backtests. Because thinking from the keyboard is easy, but holding it with numbers is already another story. I�m going to try this contract in demo and paper-trading as soon as it is available. Then we talk with data, not with prejudices.

Some talk about �lack of liquidity� as if it were something static. Liquidity is like trust: it is built. If the CME maintains its momentum and institutionals participate, it will soon become a relevant product. Let�s look forward. Criticizing because something is not perfect from day one is missing the opportunity to be part of its evolution. Isn�t that what every good trader is looking for?