Dalian Commodity Exchange (DCE) issues a notice on March 9 to solicit public opinions on liquefied petroleum gas (LPG) futures and options contracts and relevant rules, accelerating the pace of listing the long-waited LPG futures and options.
According to the notice, DCE now solicits public opinions on the “LPG Futures Contract of Dalian Commodity Exchange (Exposure Draft)”, the “Detailed Rules of LPG Futures of Dalian Commodity Exchange (Exposure Draft)” and the “LPG Options Contract of Dalian Commodity Exchange (Exposure Draft) and the Drafting Instruction”, etc. The deadline is March 13, 2020.
According to the released exposure drafts of the contracts and the detailed rules, the trading code of LPG futures contract is PG; the trading unit is 20 tonnes / contract; the minimum tick size is 1 CNY/ tonne; the price limit range is 4% of the settlement price of the last trading day; and the minimum trading margin is 5% of the contract value. The contract months are from January to December. The last trading day and the last delivery day are the 4th trading day to the last of the contract month and the 3rd trading day after the last trading day respectively.
With regard to the delivery quality standards, a DCE official says that DCE has formulated the delivery quality indexes based on the generally-adopted National Standard GB11174-2011, including physical index (density and vapour pressure), constituent index, residue index (evaporated residue and oil stain observation), corrosion index (copper corrosion, total sulphur content and sulfuretted hydrogen), and free water, to ensure that the major delivery quality standards conform to the mainstream standards in spot trading. Besides, the gas mixture (volume ratio of 20%≤C3≤60%) is set as the standard product.
In terms of the delivery method, three delivery methods are available for the LPG futures: EFP delivery, one-off delivery and rolling delivery; and the delivery unit is 20 tonnes.
As for the delivery area, the benchmark delivery site of the LPG futures is Guangdong Province and the delivery areas include South China, East China and North China.
While issuing the exposure drafts of the contract and detailed rules of LPG futures, DCE has also solicited public opinions on the LPG options contract. It is for the first time in the domestic derivatives market that the futures and options of a same product are listed at the same time, which has attracted the attention of all relevant parties.
According to the notice, the LPG options include call options and put options. The trading unit is 1 LPG futures contract (20 tonnes); the minimum tick size is 0.2 CNY/ tonne, 20% of that of the underlying futures, to increase the accuracy of the options offering. The price limit range and trading months of the LPG options are the same with those of the LPG futures contracts, and the exercise price is the settlement price of futures contract on the last trading day plus or minus 1.5 times of the price limit range on the then-current day.
A market participant says that the LPG is one of the major fuels and chemical materials and has been widely used as domestic fuel, industrial and commercial fuel and automotive fuel. China is the largest LPG consumer and importer in the world and the industry enterprises have high appeals for listing derivatives products due to the fierce price fluctuations of the LPG in recent years. Listing derivatives instruments to serve the sound development of the LPG industry is of great significance to facilitate the market-oriented reform in the field of energy in China and guarantee the stable operation of the petrochemical engineering industry in China.
The DCE official says that DCE has completed the design of contracts and rules of the LPG futures and options on the bases of the in-depth market survey, extensive opinions collection and full demonstration. Next, it will make research on the collected opinions and suggestions, further optimize the contracts and rules, and steadily promote various preparatory work for the listing together with all parties, to ensure the smooth listing and operation of the LPG futures and options.