I. Description
The interbank market-making trading of foreign currency interest rate derivatives refers to the trading quotation and services provided by ICBC for interbank customers by email or other means in terms of foreign currency interest rate derivatives, such as foreign currency interest rate swap, foreign currency forward agreement and foreign currency interest rate option, which are introduced as follows:
The foreign currency interest rate swap means that the trading parties enter into a contract, agreeing to exchange interest one or more times in accordance with the agreed nominal foreign currency principal and interest rates within a certain period of time in the future. Generally it involves the exchange between fixed interest rate and floating interest rate.
The foreign currency forward interest rate agreement means that the trading parties enter into a contract to exchange the interest calculated with the contract interest rate and the reference interest rate (e.g., LIBOR.) based on agreed nominal principal .
The foreign currency interest rate option include the foreign currency interest rate cap (CAP), foreign currency interest rate floor (FLOOR) and a collar option (COLLAR). The foreign currency interest rate cap means the buyer obtains a right after paying a certain option premium to the seller, according to which if in the next one or more interest-bearing periods, the market interest rate (such as LIBOR) is higher than the agreed fixed interest rate (execution price) and the exercise of right is good for the buyer, the buyer may exercise the right and the seller must pay the buyer the interest calculated with the gap between the market interest rate and the fixed interest rate (execution price); if the market interest rate (such as LIBOR) is lower than the agreed fixed interest rate (execution price) and the exercise of right is bad for the buyer, the buyer doesn’t exercise the right and no interest payment occurs between the two parties. The foreign currency interest rate floor means the buyer obtains a right after paying a certain option premium to the seller, according to which if in the next one or more interest-bearing periods, the market interest rate (such as LIBOR) is lower than the agreed fixed interest rate (execution price) and the exercise of right is good for the buyer, the buyer may exercise the right and the seller must pay the buyer the interest calculated with the gap between the market interest rate and the fixed interest rate (execution price); if the market interest rate (such as LIBOR) is higher than the agreed fixed interest rate (execution price) and the exercise of right is bad for the customer, the buyer doesn’t exercise the right and no interest payment occurs between the two parties. The collar option means the combination of foreign currency interest rate floor and foreign currency interest rate cap.

II. Target Customers
Financial institution that have the need for foreign currency interest rate derivatives trading and possess derivatives trading qualifications.

III. Functional Features
1. ICBC provides financial institutions with the convenience in trading foreign currency interest rate derivatives through the foreign exchange rate interest rate derivatives market-making transactions.
2. The foreign currency interest rate derivatives have varied types, flexible elements and convenient transactions.

IV. ICBC Advantages
With professional and experienced traders as well as product design and quantitative analysis teams, flexible pricing mechanism and strong competitiveness, ICBC can provide superior product prices.

V. Price
ICBC provides quotation for foreign currency interest rate derivatives based on market price trends and updates them in real time based on market changes.
VI. Service Channels and Hours
Interbank customers can inquire the price from ICBC through emails to conduct foreign currency interest rate derivative trading with ICBC.
Trading hours are from 8:30 to 17:30 from Monday to Friday (excluding statutory holidays).

VII. Operation Guide
1. Agreement signing
To conduct foreign currency interest rate derivative trading, interbank customers has to sign the NAFMII agreement with ICBC. If ICBC’s interbank market making trading platform is used to handle foreign currency interest rate derivative trading, the customers has to sign corresponding agreements with ICBC, covering user instructions, risk exemption clauses, service termination clauses, etc., to confirm that the customer fully understands the trading structure and potential risks and is willing to assume corresponding trading risks and potential losses.
2. Trade closing
Interbank customers inquire the price from ICBC through emails and ICBC replies with the latest price. If the customer accepts the price, the two parties will close the trading. After the trading is closed, the two parties perform the relevant delivery or payment obligations in accordance with the agreement during the product’s existence and expiration date.

VIII. Risk Prompt
Due to uncertainties in the future exchange rate changes, interbank customers may face the market risk of floating gains and losses due to fluctuations in market interest rates after conducting foreign currency interest rate derivatives trading.

Note: The information given on this page is for reference only. See the announcements and rules of local outlets for details.