THE NEW RMB ELECTRONIC TRADING SYSTEM

Under the leadership of the People's Bank of China(PBC) and with the support of market members, the National Interbank Funding Center has completed the development of the new RMB Electronic Trading System (ET03) after more than one year's hard working. The new system will come into play on March 31, 2003 and will help meet the demands of the rapidly developing money market.

Based on the previous experience with the former system, the ET03 will promote the interbank money market with its breakthroughs in framework design, trade and service modules as well as with its functions.

The composition and service scope of the ET03

The ET03 is composed of three sub-systems for trading, brokering and floor management. The new system provides quoting, trading and information services for interbank credit lending, repo, bond trade and distributing. It also provides same-city overnight lending for the jurisdiction areas of some PBC branches.

Characteristics of the ET03

With an open-ended design, the ET03 aims to satisfy the varying and increasing demands of the market.

Expandability: New market businesses, trading varieties and instruments can be added into the ET03.

Integrity: The new trading system integrates the trading system, information system and F-system into one.

Compatibility: While focusing on the inquiry trading pattern, the new system has also developed a unilateral matching pattern for small amount trading, two-way quotation and quoted distribution.

Diversity: The service pattern in the new system is diversified with voice broking and electronic broking complementing each other.

Openness: The ET03 has reserved two types of standard data interface, one for the internal management of trading members and the other for the bond custodian settlement system.

Functions of the ET03

In addition to the existing inquiry trading pattern, matching will be applied to small amount trading, two-way quotation and quoted distribution. The unilateral matching follows the principle of fixed price and time priority.

Anonymous quotation and trading have been realized in the ET03. Anonymous trading is flexible, and allows the setting of quotation range, counterparty scope and validity. After a transaction is conducted, the identity of the two counterparties will be revealed and they will perform the clearing themselves.

The ET03 facilitates bond issuing in that it adds the functions of subscription intention collecting, actual distributing and quoted distributing.

As another measure for service improvement, the new system allows trading members to download their quotations and transaction data in real time or afterwards for further processing.

A chief dealer system will be adopted in the new trading system. Trading members appoint chief dealers, and, in case of any personnel change, should inform the Funding Center in written form. The trading members can decide the number and relevant business authorization of the chief dealers according to their own business situation.

The ET03 provides prompting service for same-day clearing and clearing tracking.

In order to facilitate the members who need to give more than one issue of bonds as mortgage in one single repo, the ET03 introduces multi-bond repo, which can only be initiated by the repo party. The reverse repo party can only decrease rather than increase bond variety.

Dealers can choose to send a package of quotations after their input into the new system.

The system can also keep previous public quotations and two-way quotations from dealers, so that they can resend the quotations after amendment and confirmation.

The ET03 provides online conversation for trading members. Dealers can send conversation content to a certain dealer or agents.

The ET03 integrates the trading system with the information system and F-system, thus realizing convenient switching between the three systems.

In the trading process, all quotations and market situations are accessible simultaneously on www.chinamoney.com.cn. The quotation, trading and market data of bonds are embodied into the F-system, serving as the basis for bond analysis.

(by Liu Yanlin)