The capital operation center of the China Industrial Bank (CIB) and the Shanghai branch of DBS Bank Co., Ltd reached an interest rate swap on April 8, the first of its kind in the Shanghai Free Trade Zone (FTZ), local newspaper Pudong Times reported.

An interest rate swap is a liquid financial derivative instrument in which two parties agree to exchange interest rate cash flows, based on a specified notional amount, from a fixed rate to a floating rate (or vice versa), or from one floating rate to another.

The CIB center and DBS Shanghai branch, in this case, agreed on the RMB as a notional principal amount, while using US dollars as the currency of settlement. The swap was processed through the China Foreign Exchange Trade System in the Shanghai FTZ.

The presence of a FTZ interest rate derivatives market provides overseas investors with more investment options and channels, and helps domestic institutions better control the right pricing of the RMB interest rate market, said experts.

The CIB capital operation center is a professional capital operation institute engaged in many financial markets.