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On July 29, Dalian Commodity Exchange (DCE) issued a notice on the modification to the provisions related to the position limit management in the "Dalian Commodity Exchange Measures for Risk Management" with the revised rules to come into effect in the settlement as of August 5, 2013.
According to the specific adjustment to the position limit of the futures companies members, when the contract positions reach the specified scale and above of a product, the position limit should be implemented for the futures company member in the proportion of 25%; when the contract positions are below the specified scale, the position limit will not be implemented for the futures company member. The market position scales for implementing proportioned position limit will continue to adopt the existing standards of the rules. And DCE will no longer implement compulsory closing for the over positions of the futures companies members.
According to sources, the model adopted by DCE for the coke product since 2011 that the limit is not applied to the position below a specific size for a futures company member and the proportioned position limit is imposed to a specific size and above has been well received by the member units who expect to extend the model to more products. The implementation of the revised model integrating the speculation position limits to the new and old products will provide space for the futures companies members making themselves bigger and stronger on the premise of strict control of risks.
According to an official of DCE, in recent years, the futures market in Dalian is steadily expanding with the ever increasing number of participating clients. Though in order to better serve the members and investors, DCE has settled the problems such as the industrial clients’ hedging positions occupying the members’ limit positions and the lack of clients’ arbitrage position limit by implementing new measures for hedging management and the system of arbitrage positions exemption, there still exists the problem of the lack of the members’ speculation position limit. There are frequent cases that the members’ lack of position limit leads to the forced transfer of the clients’ positions with the problem especially prominent in the month before the delivery, therefore, it is actually urgent to adjust and optimize the existing position limit model of the futures companies’ members.
Market participants believe that DCE’s cancelation of position limit for members with positions below specific sizes provides the members with greater space for market participation with better effects to appear especially in the month before the delivery and the delivery month. The move is of significance for the members to maintain and manage the clients, optimize the position limit models of the futures companies’ members, and improve the management provisions on speculation position limit, and will help the futures companies’ members to expand and strengthen themselves.
