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On May 4, 2018, iron ore futures was made available to overseas traders as a specified domestic product, becoming the first listed futures product in China opening to the outside world. Over the last five years, the internationalized products of Dalian Commodity Exchange (DCE) have become increasingly diverse, and sound rules and mechanisms which are aimed to facilitate the participation of international traders have been put in place. Therefore, DCE has entered a new phase of institution-based opening-up to the outside world.
During these years, DCE has continuously expanded its range of internationalized products, offering foreign traders the futures and options of RBD palm olein, No. 1 soybean, No. 2 soybean, soybean meal, and soybean oil. Currently, DCE has launched 11 specified domestic products.
Over the past five years, DCE has kept pace with the times and continued to improve, gradually establishing a more comprehensive system of rules for opening up. Since 2018, the business system of DCE’s specified domestic products has become more stable, and its business operation has been running smoothly, with some specific processes being optimized. In addition, to facilitate foreign traders’ participation, DCE has “tailored” relevant business rules while maintaining the existing rule system. For example, DCE provides foreign traders with diverse ways of participation and allows them to use the US dollar as margin. DCE has also implemented bonded delivery for iron ore, making it easier for overseas enterprises to be involved in futures trading and delivery.
To meet the needs of overseas clients, DCE has rolled out some innovative businesses. For instance, it allowed foreign banks to act as futures margin custodians in 2019, and optimized the daily settlement and exchange mechanisms for specified domestic products in 2020. In September 2022, DCE announced that Qualified Foreign Investors (QFIs) could participate in trading 14 futures and options products, such as No.1 soybean, No.2 soybean, soybean meal, soybean oil, RBD palm olein, iron ore, and LLDPE, thus providing more approaches and risk management tools for overseas clients.
To better conduct international business, DCE has obtained several licenses, including approval from the China Securities Regulatory Commission to become a Qualified Central Counterparty (QCCP), permission from the Securities and Futures Commission of Hong Kong to provide Automated Trading Services (ATS), approval from the Monetary Authority of Singapore to become a Recognized Market Operator (RMO), and inclusion on the positive list of transparency assessments for third-country trading venues by the European Securities and Markets Authority. These licenses make it easier for overseas clients to trade products of DCE.
As the opening-up continues to deepen, more and more Chinese and foreign companies are starting to use DCE’s prices for basis trading. Related overseas producers are also using the information from China’s futures market to adjust their production plans targeted at China in a timely manner.
As of the end of April this year, overseas clients from 25 countries and regions have participated in the trading of 11 specified domestic products offered by DCE. Among them, the proportion of overseas clients’ trading volume in iron ore futures has remained stable at around 3%. Over the five years since iron ore futures was introduced to overseas traders, the correlation between futures and spot prices has remained at around 90%, conveying a rational voice from the Chinese market to the international market.
Going forward, DCE will follow the principles and spirits of The Futures and Derivatives Law of China, balance openness and safety, expand the range of internationalized products, and promote overseas settlement services. In doing so, it will make its contributions to serving Chinese and foreign industrial companies and various types of traders.
