Icap forms joint venture in China

Interdealer broker Icap is to form a joint venture with the China Foreign Exchange Trade System & National Interbank Funding Center (Cfets). The venture – Shanghai Cfets International Money Broking – will provide voice-broking services for the money, bond and derivatives markets in renminbi and international markets.

Cfets is part of the People’s Bank of China, and controls the interbank forex and bond markets as well as providing its namesake trading system for products traded in this area. “With the expansion of market demand, there are significant opportunities for the development of the interbank market for financial products. Compared with the global financial market, China’s interbank market still has great potential for development and working with Icap in this joint venture will help us accelerate that development,” Cfets president Xie Duo said.

Michael Spencer, group chief executive of Icap, said: “This is an exciting prospect for Icap; in the next few years the volume of transactions in Chinese wholesale financial products will rise rapidly and China will be recognised globally as one of the most important and liquid markets.”

This time last year, the China Banking Regulatory Commission (CBRC) released a statement identifying the benefits money brokers can bring to domestic markets and issued provisional rules governing money brokers. Under the rules, the CBRC decided to allow some ‘pilot establishments’ before opening up the market gradually.

These 'pilot establishments' would initially be in the form of Sino-foreign joint ventures. On November 8, the CBRC officially approved the first such money broker to operate in China by allowing interdealer broker Tullett Prebon to partner Shanghai International Trust & Investment Corporation. The venture formally started on December 20 as Tullett Prebon Sitico. Other international brokers, such as GFI and BGC, are reportedly evaluating their own plans to partner brokers in China.