On the afternoon of May 12, sponsored by Dalian Commodity Exchange (DCE) and the China Futures Association (CFA), the “Forum on Business Development of Risk Management Subsidiaries of Futures Companies” was held in Beijing, and attending the meeting were the officials of DCE, the CFA, commercial banks and the risk management subsidiaries of 20 futures companies, who compared notes on the current business development of the risk management subsidiaries, the directions of the cooperation between risk management subsidiaries and commercial banks, the banking-futures cooperation in business development and other topics.
The officials of the risk management subsidiaries and the representatives of the banks briefed the forum on the performance of their futures-related businesses respectively. According to the representatives of the risk management subsidiaries, currently the main businesses of the risk management subsidiaries are warehouse receipt services, co-hedging, forward pricing and basis trading, with the support of the banks in urgent need in offering the businesses; the representatives of the banks pointed out that at present, in the aspects such as the third-party risk management and product innovation, the banks also need to connect with the risk management subsidiaries, and the cooperation of the two sides will not only respond to the situation of the market development and the service for the real economy but also meet the requirements for their own business expansion and innovation.
Cong Longyun, general manager of Wanda Futures, said: “In more than one year since its establishment, our risk management subsidiary has made the orientations clearer and clearer after a period of exploration. Centering on the core orientation toward becoming a bulk commodity risk management services provider, we have offered the financial services and risk management businesses, with the main businesses covering the warehouse receipt services, co-hedging, forward pricing and basis trading. The OTC pricing is our strong point and at present we have set up a special team for it.”
According to the attendees, currently, as the platform for the futures market serving the real industries, the risk management subsidiaries have set the core positioning as the risk management intermediaries and capital intermediaries and the purpose of providing services in the bulk commodity risk management for the enterprises who are unable to directly participate in the derivatives market, and some risk management subsidiaries have developed into service providers offering the enterprises bulk commodity OTC options products with some of the functions in serving the real economy brought into play. In addition, with the constant expansion of the businesses, the revenues of some risk management subsidiaries are likely to account for 15-20% of the profits of the futures companies. Some insiders expect the profits earned by the subsidiaries to make one of the important sources of revenues of the futures companies in the future, and the risk management subsidiaries will make an important trend for the transformation and upgrading of the futures companies.
Despite the achievements made in the businesses, in general, the risk management subsidiaries are at the early stage of development, facing many difficulties and needing support in various aspects. According to the officials of Yong’an Futures, CITIC Futures and other futures companies, the fund shortage is the most pressing problem for the risk management subsidiaries currently. For various reasons, it is not easy for the risk management subsidiaries to obtain bank credits, and more support from the banks is anticipated. Fu Xiangguang, general manager of Ruida Xinkong Capital Management Co., Ltd., said, “We used to contact a number of banks for credit granting, and we deeply realized that the negotiations were difficult.”
Replying to the issue of financial support raised by the officials of the risk management subsidiaries, the relevant officials of China Construction Bank, Agricultural Bank of China, Shanghai Pudong Development Bank, Industrial Bank, China Minsheng Bank and China Merchants Bank analyzed the reasons for the difficulties of the subsidiaries in financing with the banks from the perspective of the banks. The representative of Shanghai Pudong Development Bank pointed out that generally the banks issue the loans to the enterprises in the ways of credit, guarantee and mortgage (pledge) credit, etc. however, it is difficult to assess the asset quality of the risk management subsidiaries with less than one year of operation, and the provisions prohibiting futures companies from guaranteeing their own spot subsidiaries also restrict the development of relevant businesses. Actively creating the unique brands for the futures services, Shanghai Pudong Development Bank is willing to work with the futures industry to carry out all kinds of banking-futures cooperation and innovation such as margin depository service, asset management, risk management and warehouse receipt financing.
An official of the head office of China Merchants Bank said: “Just as the futures companies, banks are also in the service industry, but the banking is a special industry dealing with funds and risks. In this context, banks try to better the clients while attaching great importance to effectively managing the risks. Currently, the risk management subsidiaries of the futures companies have not been in operation for a long time and the banks need to strengthen their understanding of the subsidiaries and gain awareness of the business features and potential risk points of the subsidiaries. On the basis of in-depth understanding, we will continue to improve the capacity for identifying and defusing relevant risks so as to enhance the cooperation. In general, there is great space for cooperation between the two sides in the futures, and as a commercial bank active in innovation-based development, China Merchants Bank is willing to actively make attempts.”
Now there is little integration of the futures system and the banking system, but changes to the situation will be seen in the future. Now there are three visible orientations of the cooperation between the banks and futures subsidiaries: the clients-oriented cooperation, the funds-oriented cooperation and the risk management-oriented cooperation. He said that China Construction Bank has paid special attention to the development of the futures industry, and there is great space for the cooperation with the futures companies in the future.
An official of the institution affairs department of the Agricultural Bank of China said, “In the process of promoting the relevant businesses, the cooperation between the Agricultural Bank of China and the futures companies is yet to be expanded and deepened. Currently the cooperation focuses on the basic kinds of depository service, settlement and transfer, and in the future our bank is willing to take an active part in the development of the futures industry.”
A DCE official said that in order to deepen the service for the service industry and the real economy, DCE attaches great importance to the development of the businesses of the risk management subsidiaries and the banking-futures cooperative businesses. This year DCE has made the promotion of the banking-futures cooperation one of its key tasks, and will continue to deepen the cooperation with the banks in the development of the industrial clients, the innovation of the products, the factory warehouse letter of guarantee, the warehouse receipt financing and other businesses; meanwhile, DCE will continue to work with the CFA and other institutions to build the communication platforms for the business development of the risk management subsidiaries, actively respond to the demands in development and the suggestions of the risk management subsidiaries, make every effort in supporting the development of all the businesses of the futures risk management subsidiaries, guide the subsidiaries in providing the risk management services and the comprehensive financial services for the relevant industries, and further strengthen the capacity of Dalian futures market for serving the real economy.