Dalian Commodity Exchange (DCE) holds the “Institutional Commodity Derivatives Forum (ICDF) 2019” in Dalian on August 27. DCE Chairman Li Zhengqiang says in the speech that facilitating the benign interaction and integrated development between industrial enterprises and investment institutions and creating the participant ecology with complete varieties, perfect structure and complementary functions are of great significance for the long-term sound and stable development of the commodity derivatives market.
Li says that over the past years, under the support of all sectors of society, DCE has deeply implemented the requirements of the 19th CPC National Congress and the National Conference on Financial Work, actively practiced the original mission of the futures market in serving the real economy and the national strategy, initially formed the diversified and open development pattern involving futures, options and swaps and connecting the exchange-traded and over-the-counter markets as well as the domestic and overseas markets. In this process, DCE has attached great importance to the service for institutional investors to involve in the commodity derivatives market. First, DCE has enriched the products system and kept expanding institutional investors’ asset allocation channel and the scope of serving the real economy. Currently, the 18 futures products and 2 options products listed on DCE constitute 6 futures sectors of grain, oils and oil seeds, forestry, livestock, chemical, energy and minerals, and formed risk-avoiding chains for five major industries namely, oils and oil seeds, corn producing and processing, animal feed, plastic chemical, and coal, coke and iron ores. Second, DCE has offered sufficient market capacity and provided institutional investors with the space to allocate resources and serve the real economy. From January to July this year, the trading volume of DCE futures reached 681 million contracts (unilateral, the same below), the trading turnover RMB 36.26 trillion, and the average daily open interest 6.0228 million contracts, accounting for 32%, 23% and 39% of the entire market respectively, and the average daily turnover rate was 0.76. The annual trading volume of DCE options reached 9.5877 million contracts, the trading turnover RMB 4.176 billion, and the average daily open interest 416,400 contracts, taking up 57%, 20% and 76% of the entire commodity options market respectively, and the market presented sufficient liquidity. Third, DCE has provided market investors and industrial clients with asset management and risk management instruments by strengthening the efforts on index development and application. At present, 37 commodity futures indexes and 2 spot index series have been formulated and released, and institutions have launched 17 products based on DCE indexes, such as structural deposit and wealth management of bank, securities traders’ income voucher, futures asset management plan, and index insurance.
Besides, DCE has committed itself to creating a good environment for institutional investors to involve in the derivatives market. In terms of market cultivation, DCE has organized market cultivation activities like EDP training, surveys and investigations, which has helped institutional investors to learn about the operation rules of commodity futures and search for market trading opportunities; DCE has also established industry-finance training bases in cooperation with 18 industry enterprises and financial institutions in China and carried out cultivation activities for a total of 2,269 enterprise by relying on leading industrial enterprises and large financial institutions. With regard to platform building, the over-the-counter market system has kept optimizing, the commodity index swaps business has covered many products like agricultural products, ferrous products and chemical products, the number of dealers has reached 66, and financial institutions have started to help entity enterprises to avoid price fluctuation risks through the over-the-counter market. As for promoting models, DCE has supported the cooperation between futures companies, banks, insurance companies and securities companies through the “insurance + futures”, over-the-counter options, and basis trading pilot, kept increasing the participation degree of institutional investors, and jointly enhanced the level of serving the real economy.
DCE’s market structure has been optimized after years of continuous efforts. From January to July of this year, the open interest of corporate clients including institutional clients and industrial clients exceeded 52% of the total in the market, becoming a key leading force in the market. There are 6,072 investment institutions (products) and 7,688 industrial enterprises involved in the trading, accounting for 44% and 56% of the total participating corporate clients, respectively.
Li says that the transformation of the economic development pattern in China, the optimization of economic structure and the change of the international environment will undoubtedly exert profound influence on all industry chains. As the production and operation activities of upstream, middle stream and downstream industrial enterprises are to face increasing uncertainties, they are urgently in need of the commodity derivatives market to play its price discovery and riskmanagement functions. Next, while guaranteeing the safe and stable operation of the market and preliminarily realizing the diversified opening-up and the strategic transformation, DCE will, according to the requirements of “4 respects” and “1 joint force” of the China Securities Regulatory Commission (CSRC), keep consolidating the stable development trend, the harmonious ecological environment and the strategic transformation results, enriching the connotation of the diversified and open market, and increasing the market operation efficiency, the industry enterprises’ participation degree, the futures prices’ influence and the capacity of serving the real economy, with an aim of creating better conditions for various institutions to serve the entity industries.
Specifically, DCE will accelerate the listing of styrene, liquefied petroleum gas, hog and dry red pepper futures and iron ore options and the research on container transport capacity, gas coal and scrap steel futures as well as coking coal and metallurgical coke options, and continue to expand the scale of commodity swaps business and strengthen the efforts on the development and promotion of commodity indexes. We will continuously improve relevant business rules of internationalization, facilitate the internationalization of RBD palm olein, No. 1 soybean, LLDPE, PP and other products, and finish the policy design as well as supporting service for QFII and other institutions to involve in the futures market. Besides, we will continuously join hands with futures companies, insurance companies, commercial banks and securities companies to advance the Farmers’ Income Guarantee Plan” and the “Corporate Risk Management Plan” and well manage the platforms for institutions to serve the bank-futures cooperation, the institutional assembly and the industry-finance training base. In the near future, DCE will launch the basis trading platform to promote the wider implementation of basis trading mode in coal, coke, iron ores and plastic chemical products and help the domestic and overseas entities to carry out spot trading more efficiently, conveniently and safely. With regard to improving the contract system and rules, DCE will optimize the market maker mechanism, promote the continuity of dominant contracts and the vitality of near-month contracts, and further increase the market operation’s quality and efficiency.
The forum, with the theme of “energize the new era and create a new future by integrating industrial and financial capital”, aims at strengthening financial institutions’ service for the real economy with bulk commodities as the link, and boosting the development of institutional investors and the industry-finance combination in the commodity futures market. A total of 11 experts have been invited to deliver keynote speeches on the development and prospects of the FICC business of securities companies, the assets management of futures companies and the opportunities and innovation of their subsidiaries’ business, and the current situation and trend of private equity involving in the commodity market, and 2 themed panels on the financial institutions fueling the real economy development in the financial supply-side reform, and the investment and risk management of bulk commodities have been organized. Attending the activity are representatives from the CSRC, the Dalian Government, industrial associations, DCE’s member entities, domestic and overseas financial institutions, industrial enterprises and news media, as well as industrial experts.