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On November 28, the “SOF-DCE agricultural products index” jointly developed by Dalian Futures Information Technology Co., Ltd. (DFITC), a subsidiary of Dalian Commodity Exchange (DCE), and Shanghai Orient Futures Co., Ltd. (SOF) was officially launched in Shanghai, and in the future, the index will be positioned as an underlying index for domestic commodity futures ETF products, whose issuance resulted in a new leading indicator for DCE’s agricultural futures products.
The base period of the index is December 30, 2005, and the base value of the index is 100 points. The index was designed mainly for the agricultural futures products listed and traded on DCE and is highly characterized by DCE.
A DFITC official said that currently the index has included five futures products of soybeans, soybean meal, soybean oil, corn and palm oil, and the open interest is the indicator in the selection of dominant component contracts, that is, the determination is based on the largest open interests. If a number of contracts report the same largest open interest, the trading volume will be referred to. The date to adjust the weights of the component contracts is the first trading days in April and October every year. In the future the index is positioned as an underlying index for domestic commodity futures ETF products, and through the commodity futures ETF representing the securitization of futures products, the futures market will be linked up with the securities market, which is of innovative value and great significance in the aspects of meeting the demand of the institutional investors against the inflation and diversified development of products.
A DCE official in charge of the index business said that the introduction of the “SOF-DCE agricultural products index” is the result of cooperation between the member units and DCE in financial innovation, which will help further improve the market-oriented pricing mechanism of agricultural products. The object of the index is the agricultural futures products listed and traded on DCE, and the price discovery function of the futures market makes the index act as a leading indicator, which will be conducive to judging the trends of the agricultural products market. And the release of the index will also promote the development of relevant products and lay the foundation for the financialization of other commodity futures products in the future. The ETF funds to be developed on the basis of the index in the future will become an important bond and bridge linking up futures traders, securities traders, institutional investors and all other market participants, push the fund companies to get more actively involved in the commodity market, give full play to the role of the institutional investors, further enhance the market liquidity of the agricultural futures products and promote the market functioning.
An SOF official said that with corn, soybeans, soybean meal, palm oil and other agricultural futures products, DCE has become a pricing conference center for the domestic markets, and as the international correlation and influence of relevant products are increasingly enhanced, the prices of soybeans, palm oil and other related products have become the main basis for many overseas institutional investors in analyzing the supply and demand of the global market and some enterprises have made the DCE prices important reference prices in making decisions for international trade and procurement. Therefore, the development of the index will fully expand the influence of the futures prices and further enhance the service of the futures market for the real economy. In the future, the index ETF to be developed on the basis of DCE’s agricultural futures products will help expand the global influence of DCE’s agricultural futures prices.
With continuous innovation and development of new products and new businesses in recent years, DCE has been capable of developing indexes in various product sectors in light of the market size and capacity. In accordance with the current situations and development rules of international and domestic futures markets as well as the policy support and market demand, DCE set up the “work group for pig futures and commodity indexes” in May, specially researching and exploring the spot and futures indexes especially the commodity ETF. Meanwhile, DCE entrusted DFITC to carry out the business of authorizing index development and external operation. This cooperation between SOF and DFITC marks a sound beginning for DCE to promote the index-related work, and in the future there will be more specialized institutions jointing advancing the development of other indexes. In addition, it is also leant that the “Guidelines of DCE for the Business of Authorizing Development of Indexes” has been officially published, and the Guidelines specifies the business scope of the index development institutions using the relevant products of DCE to develop and release the indexes as well as develop the derivatives, and defines the rules for the issuance modes and ownership of the indexes and other aspects. At the press conference, SOF and DFITC briefed on the guidelines for the index designing, the index business and platform of DFITC and other aspects respectively.
