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On April 26, Dalian Commodity Exchange (DCE) issued another notice to further increase the trading fees of iron ore, coking coal, metallurgical coke and PP futures. A DCE spokesman said that the move is aimed at further intensifying supervision, resolutely curbing the tendency of over-speculation, effectively preventing risks and ensuring the safe and stable operation of the market.
According to the notice, starting from April 27, the trading fee rate of the metallurgical coke and coking coal futures will be adjusted to 0.036% of the turnover, with that of the iron ore futures to be adjusted from 0.018% to 0.03% of the turnover and that of the PP futures to be changed from 0.018% to 0.024% of the turnover.
The spokesman said that as recently there are complex factors affecting the market, the prices of bulk commodities record significant fluctuations and some futures products especially those in the ferrous sector have seen the volume to open interest ratios grow rapidly and remain at high levels, the market has shown the tendency toward over-speculation. In the process DCE has attached great importance to prevention and control of market risks. Since April 18, DCE has taken a number of regulatory measures, including expanding the price limits of some futures products, increasing the minimum trading margins, cancelling the discounts for the intra-day trading fees and cancelling the exemption for the unusual transaction behaviors from spread trading, etc., in a bid to guide the investors in participating in the market in a rational way, curb the tendency towards over-speculation and prevent and control market risks. On the whole, the relevant measures have achieved some positive effects, but the volume to open interest ratios of certain products remain at relatively high levels. Therefore, it is necessary to take further actions for prevention and control, so as to maintain the stable development of the market.
He also said that at present the economic situation is complex, the futures market is not fully developed yet and some sectors of the society still have limited understanding of the futures market. In such a situation, it is still an arduous task to curb over-speculation and prevent market risks. Next, DCE will continue to keep the market operation on high alert, maintain close monitoring and supervision over the market trends and take further regulatory initiatives if necessary. In addition, DCE will intensify the market inspection, crack down on rule violations, in order to ensure the safe and stable operation of the market and hold fast to the bottom line of zero occurrence of systemic risks and regional risks.
A market analyst said that although China is a major commodity producer and consumer, overall, there is still gap between the futures market size and the enterprises’ demand and many entity enterprises have not participated in the market yet. Besides, at present in the domestic futures market the majority are still individual investors, who are very likely to follow the trend blindly when there are significant fluctuations, further resulting in the risk of over-speculation. The margin in the domestic futures market is still at the level of only over RMB 400 billion, lower than the high last year, indicating that there are limited external funds flowing into the futures market, far less than the outsiders’ imagination. But under the T+0 trading mechanism in the futures market, some products have recorded large trading volumes and excessively high turnover rates in short-term operations, leading to significant potential risks in the market. In such a context, the domestic futures exchanges have taken measures successively, showing their guidance and determination to attach more importance to quality than market scale and maintain the stable development of the market.
The analyst also pointed out that according to the recent market performance, the relevant measures have achieved proper effects, as the overall market has cooled down. On the 26th, the unilateral trading volume of domestic commodity futures stood at 27.419 million contracts, down by 7.335 million contracts from the previous trading day. The turnover rates of most products have seen drops. Among the related products, today, the iron ore, coking coal, metallurgical coke and PP futures whose trading fees have been reduced on DCE saw their trading volumes decrease compared with the previous trading day, with the trading volumes ranking 2nd, 20th, 12th and 5th respectively of all domestic commodity futures products that day. But their turnover rates are still at relatively high levels since their listing, especially the metallurgical coke futures with the turnover rate ranking the highest in all futures products on DCE. In this case, DCE has further increased the trading fees for the relevant products and stepped up the control of speculation, showing that DCE has attached high importance to and taken resolute attitude towards the prevention and control of market risks.
