Branches and Foreign Exchange Administration Departments of the various provinces, autonomous regions, and municipalities directly under the central government and the branches in Shenzhen, Dalian, Qingdao, Xiamen, and Ningbo, and all national banks:

In order to further streamline administration and to delegate power to lower levels, diversify market players, promote the development of the foreign exchange market, adjust the relevant management policies regarding entry into inter-bank foreign exchange market by financial institutions, the Regulations of the People’s Republic of China on Foreign Exchange Administration are hereby notified as follows:

I. After qualifying for spot foreign exchange settlement and sales business upon the approval of the State Administration of Foreign Exchange (SAFE) and qualifying for derivative product trading business upon the approval of the relevant financial regulatory departments, domestic financial institutions can, based on the prerequisite of meeting the technical specifications for the relevant inter-bank foreign exchange market business, become members of the inter-bank foreign exchange market and conduct spot trading and derivative product trading of RMB against foreign exchange.  The SAFE will not require ex-ante qualifying approvals for entry into the inter-bank foreign exchange market. 

Financial institutions are required to submit for the record their internal operational procedures and risk management system for spot trading and derivative product trading of RMB against foreign exchange to the China Foreign Exchange Trade System (CFETS). 

II. The trading of RMB against foreign exchange conducted by financial institutions in the inter-bank foreign exchange market shall be conducted for the purpose of hedging risks arising from the exchange settlement and sale business for clients and for themselves, conducting market-making and proprietary transactions within the limit of the overall position of the foreign exchange settlements and sales, as well as engaging in hedging activities for themselves pursuant to the relevant regulations.  Such financial institutions shall observe the laws and regulations, rules on inter-bank foreign exchange market transactions, clearing, and information, as well as the stipulations of the relevant financial regulatory authorities.

III. Currency brokerage companies (including branches) incorporated with the approval of the banking regulatory authorities can, as specified by the foreign exchange administration, conduct foreign exchange brokerage business, such as derivative product trading of RMB against foreign exchange and trading of foreign exchange against foreign exchange and foreign exchange lending, and the SAFE will not require ex-ante qualifying approvals. When conducting foreign exchange brokerage business, the currency brokerage companies shall observe the relevant rules and regulations for the inter-bank foreign exchange market.

IV. The Trading Center and the Inter-bank Market Clearing House Co., Ltd. (the “Shanghai Clearing House”) shall, in line with the requirements of this Circular, adjust the relevant business rules and systems accordingly, and shall provide effective technical support and services. The Trading Center and the Shanghai Clearing House shall be responsible for the daily monitoring of inter-bank trading and clearing of RMB against foreign exchange and shall promptly report to the SAFE whenever any abnormal transactions or clearing situations are discovered. 

V. Financial institutions shall observe professional ethics and follow market practices so as to promote self-disciplined management and standardized development of the foreign exchange market. 

VI. This Circular will come into force as of January 1, 2015. At the same time, the Reply of the SAFE on Relevant Issues Concerning the Conduct of RMB and Foreign Currency Swap Transactions by the Bank of China on the Inter-bank Foreign Exchange Market (Huifu No. 61[2006]), the Circular of the State Administration of Foreign Exchange on Relevant Issues Concerning the Introduction of Renminbi-Against-Foreign Exchange Options Trading (Huifa No. 8 [2011]), the Circular of the State Administration of Foreign Exchange on Adjustments to the Administration of Some Businesses in the Inter-bank Foreign Exchange Market (Huifa No. 30 [2012]), and the Circular of the State Administration of Foreign Exchange on Adjustments to the Administration of the Renminbi-against-Foreign Exchange Derivatives Business  (Huifa No.46 [2013]) will be repealed.  Relevant issues involving management of entry into the inter-bank foreign exchange market in other documents shall be subject to this Circular.

Upon receipt, the branches and the Foreign Exchange Administration Departments of the SAFE shall promptly distribute this Circular to the financial institutions within their respective jurisdictions.

State Administration of Foreign Exchange

December 5, 2014