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The “China and Global Derivatives Market Development Forum (CGDDF)”, organized by Dalian Commodity Exchange (DCE) and the British Futures and Options World (FOW), was held in Dalian on October 16. At the seminar on the “Construction and Development of Global Options Market” that morning, senior staffs of overseas exchanges shared the experience of mature options markets and discussed the development trend and prospect of the options market in China and the world together with senior staffs of Chinese exchanges.
China’s options market starts steadily with bright prospects
Xie Wei, Chief Operation Officer of the Shanghai Stock Exchange (SSE), said that the SSE has successfully opened the Shanghai – Hong Kong Stock Connect and launched the SSE 50ETF Options in recent 3 years. The former has greatly enhanced the international level of the SSE and the latter has improved the market structure with both spot products and derivatives products.
Li Hui, Vice President of the Shanghai Futures Exchange (SHFE), introduced that the crude oil futures was listed in March this year. Compared with other futures products, the crude oil futures has opened up the Chinese futures market, which is of great significance. And the SHFE also listed the cooper options this year.
Xing Xiangfei, Vice President of the Zhengzhou Commodity Exchange (ZCE), said that the most significant event of the ZCE over the past 3 years is the listing of white sugar, which has improved the derivatives instrument system and provided diversified choices to institutional investors and entity enterprises. As for the ZCE, the listing of options is a test for its comprehensive management and administration capacity and marks the transformation of ZCE from a single futures exchange to an exchange laying equal stress on futures and options.
“China’s first commodity options – the soybean meal options was listed on DCE on April 31, 2017, which opened up a new era for the Chinese commodity options.” Zhu Lihong said that the iron ore futures officially ushered in overseas trading participants on May 4 this year, presenting a key step forward towards the opening-up of China’s futures market.
Foreign exchanges confident in China’s options market
Praveen D.G., Chief Risk Officer of the Multi Commodity Exchange of India, introduced that similar with the options development in China, India also launched options products last year. “The Indian market is at the critical moment. It has launched options products and also integrated securities products. The integration on the exchange level has made possible the trading among different kinds of assets.” He said that the Chinese and Indian markets are basically at the same stage and differ in product design and management, including investor education. Therefore, there’s a lot of work to be done to lay a good foundation. The supply of liquidity determines the future of products and is the source of life of the market. So, the focus of the future work is the investor education and the supply and management of liquidity.
William Knottenbelt, Senior Managing Director of the CME Group, believed that the participation degree of Asian options products has doubled over the past several years and the CEM Group has paid great attention to the development of Asian markets, especially the Chinese derivatives market. “We will introduce options to investors, brokers and the regulatory department and keep illustrating the concept of options and the risks of its different underlying assets.” William Knottenbelt said that a mature options market participant will have increasing understanding on the derivatives’ influence and function on downstream markets.
Looking into the future, he is very confident in the development of the options market. The US has advantages in equity options but faces challenges in product access, and each jurisdiction has to coordinate in data transparency and investor education. The US needs development and the same is true to Asian countries. It is believed that the Asian markets will have greater potential. “The Asian markets, especially the Chinese market, are high-value markets in need of key focus and cultivation and have bright market prospect.” he said.
Kirill Pestov, Managing Director and Chief Commercial Officer of the Moscow Exchange, said that the Russian market has suffered great adjustment in recent years and has been success in keeping international investors’ interests in local market, with the proportion of international participants fluctuating between 45% and 50%. The product liquidity, technical development, time of listing new products and diversified basic assets are all crucial to the success of local market. New products should be launched to attract new clients, thus maintaining competitiveness in the global market.
Bill Speth, Senior Vice President and General Manager on Global Market Research of the CBOE Global Markets, believed that the development of options markets requires improvement in options decoding and regulation framework changing to better illustrate relevant products. They are good risk management instruments but also have some risks. The experienced Asian investors, the matching between internationalization and regulatory mechanism and the coordination of floor and over-the-counter markets will boost the prosperity of the markets, especially the Chinese market.
