July marks the first anniversary of the after-hours trading at Dalian Commodity Exchange (DCE). In the past year, the after-hours trading session has seen the futures products trade actively, with investors structure gradually improved, the price gaps of relevant products significantly narrowed, and the role in transferring overnight risks brought into full play. The after-hours trading has become an important part of the operation of the futures market in Dalian.
On July 4 last year, DCE introduced the after-hours trading for the two futures products of RBD Palm Olein and Coke, officially launching the pilot for after-hours trading. On December 26 the after-hours trading was initiated for six products including Soybean Meal, Soybean Oil and Iron Ore, etc., bringing the number of the products on DCE’s after-hours trading to 8. According to statistics, as of July 6, the total trading volume at DCE’s after-hours sessions reached 335.9 million contracts (bilateral, the same below), accounting for 20% of the total volume of all DCE’s products during the period. Specifically, the trading volumes for RBD Palm Olein, Soybean Meal, Soybean Oil, Iron Ore and Coke at the after-hours trading sessions accounted for 45%, 26%, 24%, 22% and 21% of the total volumes respectively. In terms of open interest, driven by after-hours trading, the products of Iron Ore, No. 2 Soybeans and Soybean Meal have seen the open interests increase significantly, with the daily average open interests grew by 258%, 55% and 12% respectively. With regard to members and clients participating in after-hours trading, all the 153 members have been involved in after-hours trading, and as a result of the after-hours trading, the numbers of the clients participating in the products of Iron Ore, No. 2 Soybeans, Soybean Meal and Soybean Oil increased by 145%, 84%, 32% and 21% respectively.
Since DCE launched the after-hours trading session, the price gaps of relevant products have narrowed significantly. According to DCE’s data of the overnight price volatility, the overnight price volatilities of No. 1 Soybeans, Coke and RBD Palm Olein have decreased from 0.53%, 0.36% and 0.71% respectively prior to the launching of the after-hours trading to 0.21% 0.15% and 0.34% respectively at present, with all the drops exceeding 50%. The overnight price volatilities for Soybean Meal, Soybean Oil and Coking Coal declined by more than 30%. The narrowed price gaps have not only enhanced the function of price discovery of the products but also further strengthened the transverse linkage between domestic and international markets.
Since the launch of after-hours trading, DCE has dynamically tracked and assessed its effect, while listening to the opinions and suggestions of all parties concerned in the market, in an effort to timely adjust and improve the after-hours trading mechanism to meet market demands on the basis of smooth operation. In May, according to market opinions and survey feedbacks, the trading hours at night were adjusted to 21:00 to 23:30 of the previous calendar day, in a bid to better facilitate investors participation in the after-hours trading.
The after-hours trading on the futures market in Dalian has also drawn the attention of the investors on the international markets, some of whom have made or adjusted their trading strategies according to the after-hours trading in Dalian.
According to an official from DCE trading department, DCE will launch after-hours trading for more products based on market demand and optimize the after-hours trading mechanism, so as to better facilitate risk management by industrial clients and meet client needs.
