Skip to main Content
Site Search

Advanced Search

  • Mondo Visione
  • Mondo Visione - Worldwide Exchange Intelligence
Member Login

Member Login

Forgotten your password?

CSRC Formally Recognized Dalian Commodity Exchange As A Qualifying CCP

Date 24/01/2019

Recently, CSRC has formally recognized DCE as a Qualifying Central Counterparty (QCCP). This shows that Chinese futures market has further improved internationalization by adopting international standards to strengthen its market attraction and competition since the internationalization of crude oil, iron ore and PTA futures.

CCP in futures market means when deals were made, CCP would step into those deals and become all buyers’ seller and all sellers’ buyer, using the net settlement mechanism to provide central clearing services, in aiming to make sure all deals are guaranteed. As a mechanism born in the futures market, CCP clearing not only can significantly reduce counterparty default risk, but also helps to maintain the anonymity of the deals. From CCP clearing, other unique CCP services were derived, such as net settlement and margin system. CCP has become an essential part of modern clearing services and a core financial market infrastructure in most developed economies.

The legal position of Chinese futures exchanges as CCP is relatively clear. For example, CSRC Regulation No.116(2015) Article 15 stipulates that "Futures exchanges that perform the functions of settlement shall, acting in the capacity of a central counterparty, uniformly organize the settlement of trades in specified domestic futures products." Article 6 of the Detailed Clearing Rules of Dalian Commodity Exchange stipulates that "The Exchange, as a central counterparty, shall conduct centralized clearing with respect to the futures trading, and be responsible for the margin management, the risk reserves management and the prevention of the clearing risks with respect to the futures trading."

In order to be recognized as a Qualifying CCP, CCP will need to be recognized by its competent authority for meeting the international standards and establishing a standardized, complete central clearing system. International standards mainly refer to the Principles for Financial Market Infrastructures (PFMI) and its related supporting documents issued jointly by BIS and IOSCO. PFMI has 24 principles, 22 of which are related to CCP, covering CCP’s general organization, credit and liquidity risk management, settlement, default management, general business and operational risk management, access, efficiency and transparency.

In recent years, DCE has made great efforts to promote its construction towards becoming a QCCP by building a sound governance structure, implementing total risk management, optimizing clearing membership services, and establishing the risk reserves mechanism. DCE has built a standardized and complete CCP clearing system and met the principles for QCCP.

A representative from DCE commented, “Compared with common CCP, QCCP is more preferential in international regulatory requirements such as counterparty trading risk exposure weight, which can significantly reduce the transaction costs of some financial entities (mostly banks). The recognition of QCCP has positive influence not only on the exchange itself, but also to the market participants and the futures market as a whole. Being a QCCP will enhance the international influence of the exchange and attract more foreign investors to participate in the Chinese futures market. Going forward as a QCCP, DCE will continue to make efforts on the PFMI constructions including public disclosure.”