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To fully solicit market opinions and suggestions, further optimize relevant rules and operation mechanism of Mono Ethylene Glycol (MEG) futures and ensure the scientificity and rationality of the contracts rules design and the effective functioning of the market, Dalian Commodity Exchange (DCE) released a notice on November 9 to solicit public opinions on MEG futures contracts and relevant rules, accelerating the pace of listing MEG contracts.
Currently, DCE is soliciting public comments and suggestions on the exposure drafts of the “Mono Ethylene Glycol (MEG) Futures Contract of Dalian Commodity Exchange”, the “Amendments to the Detailed Trading Rules of Dalian Commodity Exchange”, the “Amendments to the Detailed Delivery Rules of Dalian Commodity Exchange”, the “Amendments to the Measures for Risk Management of Dalian Commodity Exchange”, the “Amendments to the Measures of Management of Warehouse Receipts on Par of Dalian Commodity Exchange” and the “Amendments to the Detailed Rules for Implementation of Bonded Delivery of Dalian Commodity Exchange”. And the deadline is November 20, 2018.
According to the contracts and the exposure drafts of the amendments to the Detailed Trading Rules and the Detailed Delivery Rules, the trading unit of MEG futures contracts is 10 tonnes / contract; the minimum price change is RMB 1 / tonne; the price limit is 4% of the settlement price on 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 last 4th trading day of the contract month and the 3rd trading day after the last trading day, respectively; and physical delivery is adopted.
According to the exposure drafts of the amendments to the Detailed Trading Rules and the Detailed Delivery Rules, the maximum amount of each trading order of MEG futures contract is 1,000 contracts and the delivery unit is 10 tonnes. The contract adopts rolling delivery and one-off delivery. From the first trading day of the delivery month to the trading day before the last trading day of the contract, a client can apply for rolling delivery; after the last trading day of the contract, a holder with open interests should fulfill the contract through delivery. The positions corresponding to the buying and selling positions of the same client account will be regarded as automatic position liquidation, and no delivery will be carried out for that; and the position liquidation price is the delivery settlement price.
On the basis of GB/T4649-2018 “Industrial MEG” and according to the results of surveys to companies and spot sampling inspections, DCE formed the “MEG Delivery Quality Standards of DCE (F/DCE MEG001-2018)” in the Detailed Delivery Rules. And 13 indexes: appearance, purity, diethylene glycol, tone, density, boiling range, moisture, acidity, iron content, ash content, aldehyde content, ultraviolet transmittance and chloridion have referred to the polyester requirements specified in GB/T4649-2018; and the content of 1,2-butanediol and ethylene carbonate is no more than 0.01% and 0.005%, respectively.
To ensure stable market operation, the MEG futures has adopted the same gradient trading margin system with other products and set up a threshold value to trigger the increase of trading margin in advance. Specifically, the minimum trading margin of MEG futures is 5% of the contract value and, generally, the trading margin in the delivery month and the time after the 15th trading day of the month before the delivery month is 20% and 10%, respectively. It’s worth noting that when the one-side open interest of the contract reaches 120,000 contracts and above at the settling time of a trading day from the 1st to the 14th trading day in the month before the delivery month, the trading margin of this contract will be 10% of the contract value from the settling time of that day to the 14th trading day of that month; and when the one-side open interest of the contract reaches 80,000 contracts and above at the settling time of a trading day from the 15th to the last trading day in the month before the delivery month, the trading margin of this contract will be 20% of the contract value from the settling time of that day to the last trading day of that month.
With regard to the position limit system design, MEG futures has adopted a different system from other products, the phased and gradient position limit system, for non-futures-company members and clients to prevent and control potential delivery risks. From the day of the listing of the contract to the 14th trading day in the month before the delivery month, the position limit is 8,000 contracts when the one-side open interest is 80,000 and less, or 10% of the one-side open interests when the one-side open interest is above 80,000 contracts. From the 1st to the 14th trading day in the month before the delivery month, when the one-side open interests of the contract at the settling time of a day is 120,000 contracts and above, the position limit is 3,000 contracts since the settling time of that day till the 14th trading of that month. From the 14th to the last trading day in the month before the delivery month, the position limit is 3,000 contracts. But when the one-side open interests of this contract exceeds 80,000 contracts at the settling time of a day, the position limit will be adjusted to 1,000 contracts from the settling time of that day to the last trading day of that month. The one-side position limit in the delivery month is 1,000 contracts.
In addition, according to the exposure draft of the amendments to the Measures of Management of Warehouse Receipts on Par, the warehouse receipts on par of MEG futures should all be canceled before the last trading day (included) in March of every year.
In terms of the delivery system, MEG futures can engaged in bonded delivery, and its warehouse receipts on par can be used for one-off delivery, rolling delivery and EFP delivery. According to the logistics flow direction and amount of the Chinese MEG market and the law of prices of different areas, DCE plans to set Jiangsu Province as a benchmark delivery site and Zhejiang Province, Shanghai City, Guangdong Province and Fujian Province as non-benchmark delivery sites; and the premium and discount is RMB 0 / tonne. The delivery warehouses are tank storage enterprises in such mainstream consumption and logistics distributing areas like Jiangsu, Zhejiang, Shanghai, Guangdong and Fujian, and qualified spot enterprises in delivery areas can apply for delivery factory. For the specific requirements and application documents, please refer to the “Measures for the Qualification Examination of the Designated Delivery Warehouses of DCE”.
A market participant said that MEG is one of the upstream raw materials for the polyester industry. The scale, months, delivery quality standard and delivery areas of its futures contracts conform to its features and the spot trading practice, which will help industry enterprises to take part in and make use of the MEG futures market.
A DCE official said that more than 74% of the MEG in China is used for producing polyester fiber like terylene, making it one of the major raw materials for the chemical fiber industry. Therefore, the sound development of the MEG industry is of great significance for guaranteeing the supply of chemical fiber and stabilizing the chemical fiber industry. Having conducted an in-depth market survey, solicited market opinions and made full demonstration, DCE has completed the rules design for the MEG contracts. It hopes to further improve the contracts and rules according to the comments and suggestions raised by relevant market participants and strengthen the market regulation after the listing of contracts, thus ensuring the stable operation and effective functioning of MEG futures and better serve the development of the real economy.
