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On May 11, Dalian Commodity Exchange (DCE) issued a notice on the newly revised "Measures for Risk Management of Dalian Commodity Exchange", which shall take effect as of the date of release. The trading limit system is added to the Measures, and the specific standards and plans for implementation will be announced by DCE separately.
According to the notice, the trading limit refers to the maximum volume of a position on a certain contract that a member or a client can open in a certain period of time in line with the requirements of the Exchange. Base on the different market situation, the Exchange is allowed to set trading limits on various listed products, contracts for part or all members and clients, while no limits on the amount of open positions for hedging. For the non-futures-company members or clients whose newly held positions exceeding the trading limits, the Exchange will take measures including reminding over phone, asking for reporting the situation, calling for submit a written commitment, putting them into the special supervision list, suspending opening positions and so on.
Shi Yan, an independent market analyst, said that adding the trading limit in the risk control system and clearly setting the maximum volume of a position taken by a member or a client on a certain contract in a certain period of time will help further enrich and improve the measures for risk control, strengthen the pertinence in curbing the over-speculation and preventing the manipulations in the market, and further intensify supervision and improve the long-term mechanism for preventing and controlling market risks through the establishment of the system.
Before the revision, DCE extensively solicited opinions from the member directors, related specialized committees of the Board, some clients and other market participants. All the parties concerned expressed their support for the revision to the rules, believing that the revision will supplement and improve DCE’s current measures for risk management, help enrich the supervisory means and prompt the front-line supervision.
