SHANGHAI - China will launch a new derivative instrument next week to help market participants better hedge forex risks, the operator of China's forex market said on Friday.

The launch of foreign currency non-deliverable forwards (NDF) in the interbank market on Sept. 2 will further satisfy market demand for risk-management, the China Foreign Exchange Trade System (CFETS) said in a statement.

In NDF trading, the counterparties settle the transaction, not by delivering the underlying pair of currencies, but by making a net payment that reflects the difference between the agreed forward exchange rate and spot fixing.

(Reporting by Shanghai and Beijing newsroom Editing by Tomasz Janowski and Ros Russell)