To further improve the functions of China's RMB foreign exchange derivatives market, to help market players, such as businesses and banks, to manage exchange-rate risks, to promote the development of China's foreign exchange market, and to give the market a decisive role in allocating foreign exchange resources, the State Administration of Foreign Exchange (SAFE) recently released the Circular on Adjusting the Management of RMB Foreign Exchange Derivatives (HuiFa [2013] No. 46, hereafter referred to as the Circular).

The highlights of the Circular are as follows: 1. Simplifying management of access to foreign exchange swaps and currency swaps to support the banks in better serving the real economy via streamlining administration and delegating power to lower levels.  2. Increasing the patterns in the exchange of the principal in currency swaps to help businesses manage the risks of foreign currency debts. 3. Supporting banks to improve options pricing and risk controls so as to enable banks to accurately identify, measure, and manage exchange-rate risks.

The Circular will come into force on January 1, 2014.