.jpg)
Recently an official of the agricultural products department of Dalian Commodity Exchange (DCE) said in an interview that on the basis of the principles of ensuring the smooth operation of the product, giving effective play to the functions of the futures market and adapting to the corn and other related products, DCE has designed the risk control system for the corn starch futures in a bid to effectively prevent and control the market risks. Based on the relevant market-tested systems, the systems are in line with the characteristics of corn starch and will ensure the smooth operation of the product and effectively prevent and control risks.
The risk control systems for the corn starch futures include the price limit system, the margin system, the position limit system, the large position report system, the forced position reduction system, the abnormalities handling and the risk warning system, etc. In terms of the designing of the price limit system, the official said that in the ordinary months the price limit of the corn starch futures is 4% of the settlement price of the last trading day and in the delivery month it is 6% of the settlement of the last trading day. According to the statistics of the 3,356 valid samples from January 2001 to July 2014 (data source: Wind Information), in the sample interval, the largest positive and negative fluctuation ranges for the daily average spot price of corn starch were 22.5% and -18.4% respectively, with 98.1% of the absolute values less than 4% and 90.8% of the absolute values less than 1%. Therefore, the 4% price limit set for the corn starch futures covers the vast majority of the daily fluctuation ranges, which will not only effectively accommodate market risks but also ensure the safe operation of the market. With reference to other listed products, the price limit in the delivery month is set at 6% of the settlement price of the last trading day. When the continuous cases of price limit for the corn starch futures contracts appear, DCE will increase the price limit and the level of margin.
The official stressed that when three consecutive cases of price limit occur in the market, the collection of the margins will be determined according to different cases. If the third price limit appears on the last trading day of the delivery month, the delivery will be implemented directly; if the third price limit appears on the trading day prior to the last trading day of the delivery month, the trading will continue on the last trading day of the delivery month with the price limit and the margin level of the previous day implemented; except the abovementioned two cases, DCE can take the measures such as forced position reduction and increasing margins, suspending new positions, adjusting the price limit, restricting withdrawal of funds, setting a time limit for liquidation and implementing forced liquidation according to different circumstances, in a bid to defuse the market risks.
The trade margin system is an important means for risk control in the futures market. The official said that in ordinary months the minimum trade margin is set at 5% of the contract value, and the contract margin for the delivery month will be adjusted in different periods near the delivery time. From the 15th trading day in the month before the delivery month, the margin for the corn starch futures contracts will be increased to 10% and it will be increased to 20% from the first trading day of the delivery month. As for the contracts also meeting the requirements for adjusting the trade margin in the risk management measures for the corn starch futures, the larger trade margin rate will be implemented in the collection.
According to the latest rules of DCE for the listed products, the position limit and relevant position report of the corn starch futures for the futures company members have been cancelled, so as to help the futures companies make themselves bigger and stronger. The same position limits have been set for the non-futures-company members and clients, with the base of the position limit set at 150,000 contracts (1.5 million tons). In ordinary months, before the unilateral total open interest for the contract of a certain month exceeds 150,000 contracts, the position limit will be set for non-futures-company members and clients in the form of absolute amount, with the position limit set at 15,000 contracts (150,000 tons); when it exceeds 150,000 contracts, the position limit will be set at a certain percentage of the unilateral total open interests of the contracts, with the limit at less than 10% of the unilateral total open interest of the contract. In the period close to the delivery month, the absolute-amount and tiered position limit will be set for non-futures-company members and clients, with 1,500 contracts and 4,500 contracts set respectively for the delivery month and the period after the tenth trading day in the month prior to the delivery month.
