People's Bank of China, Notice Concerning Further Improvement of the Interbank Spot Foreign Exchange Market

Issued: January 3 2006

Main contents: Starting from January 4 2006, over-the-counter transaction method (OTC Method) will be introduced to the interbank spot foreign exchange market. Interbank foreign exchange market trading entities may opt to carry out transactions through the method of centralized credit authorization and price bidding, or carry out over-the-counter transactions through the method of bilateral credit authorization and settlement (Article 1). After introducing the OTC method, the China Foreign Exchange Trading Centre shall consult all market makers in the interbank foreign exchange market before opening of session each day, and all quotes from market makers will be treated as samples for the calculation of the median exchange rate of renminbi against US dollar on the same day (Article 3). Median exchange rates of renminbi against euro, Japanese yen and Hong Kong dollar shall be translated and determined by the China Foreign Exchange Trading Centre based on the median exchange rates of renminbi against US dollar on the same day, and the exchange rates of the respective currencies against US dollar in the international foreign exchange market at 9am on the same day (Article 4). With the issue of this Notice, the floating ranges of transaction prices of renminbi against US dollar and other currencies on the interbank spot foreign exchange market and the gap ranges of the exchange rates of renminbi against US dollar posted by banks to clients shall be implemented in accordance with existing provisions (Article 5).