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Now, it is only less than 2 months to go from the delivery of the corn futures C1705 Contract with the open interest close to the highest level in the past and the open interest on one side amounting to nearly 900,000 contracts, and the market expects the delivery to hit a record high. With innovation and improvement continuously made in the delivery system of the corn futures, the industrial clients’ reasonable demands for delivery will be fully met.
According to preliminary statistics, at present, 100% of the large-sized corn trade enterprises, 75% of the corn starch processing enterprises and 50% of the top 30 domestic feed enterprise groups have been involved in the futures market.
To meet the demand for delivery in the market, Dalian Commodity Exchange (DCE) has continued to innovate in the delivery system and measures for delivery management. The first step was to set up the storage sites. In 2008, DCE set up the “storage sites” at the ports, which means that some agreement-based warehouse capacity was added near the ports as the necessary complement to the port warehouses, which implemented unified management. The second step was to extend the delivery. DCE further improved the distribution of the designated warehouses in order to extend to farther places. If the goods owners choose to carry out in and ex-warehouse businesses at the extended warehouse areas, the specific premiums and discounts should be agreed on by the goods owners and the designated delivery warehouses based on the spot market. If the buyer, after accepting the goods, failed to agree on premiums and discounts with the warehouse, goods owner could choose to receive the goods at the port, and the warehouse should make sure to transport all the goods to the port within 10 days. The extended delivery system took effect from the 1701 Contract.
The third step is to implement the group delivery. With the delivery demand increasing, only setting delivery warehouses at ports and extended warehouse areas has been far from meeting the demand of the clients in producing areas. Therefore, DCE introduced the group delivery business by selecting the large-sized enterprises with abundant warehousing resources, strong risk tolerance in delivery and capability of effective management as group delivery warehouses, which can entrust the sub-warehouses to deal with the delivery business and shall bear the incurred delivery risks, thus achieving the tiered management of the delivery risks. The group delivery system will take effect starting from C1709 Contract. DCE requires the group delivery warehouse to have at least one sub-warehouse in Northeast China as well as at least one sub-warehouse in other regions, in order to lay a foundation for the warehouse receipts switch business.
The fourth step is to study the the group credit warehouse receipt. The seller no longer needs to generate the standard warehouse receipt with qualified physicals in Northeast China. Instead, the standard warehouse receipt can be generated only by submitting to DCE the cash or bank guarantee that can cover the value of the goods. In this way, the seller will be free from the pressure of transportation and inspection prior to delivery, and it is more easy to generate the warehouse receipt.
“The lynchpin of developing a futures product relies upon the exchange’s determination to embrace the changes in the spot market and keep on innovating the delivery system.” said a DCE official. With the innovation system improved continuously, in the future the contracts other than January, May and September will also be active. Now the DCE plans to make attempts on the iron ore and soybean meal futures first.
