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Six years ago, on March 31, 2017, soybean meal options was listed for trading on Dalian Commodity Exchange (DCE), filling the gap in China’s commodity options market. Over the past six years, DCE has listed a total of 11 options, including soybean meal, corn, iron ore, LPG, PP, PVC, LLDPE, RBD palm olein, No. 1 soybean, No. 2 soybean, and soybean oil, covering various industries such as grain and oil, energy and minerals, and plastics. The total number of contracts listed has exceeded 30,000. In 2022, the total trading volume of options reached nearly 179 million lots, with an average daily open interest of 1.727 million lots, representing year-on-year growth of 74.64% and 30.94%, respectively. In 2022, DCE’s soybean meal, corn, and RBD palm olein options ranked first, second, and fourth respectively among global agricultural products options, while iron ore options ranked first among global metal options, in terms of trading volume according to statistics from the Futures Industry Association (FIA).
In 2022, the ratios of options to futures trading volume of soybean meal, corn, iron ore, RBD palm olein, and LPG were 16.43%, 24.62%, 18.86%, 11.06%, and 12.32%, up 55.84%, 126.19%, 81.98%, 164.81%, and 64.36% compared to the previous year, respectively. A positive interaction between the two markets is gradually taking shape.
In 2022, the market makers’ continuous quotation contracts covered 70% of the total trading volume of options listed on DCE. The average bid-ask spread of market makers’ continuous quotation contracts fell by 63% year-on-year. The number of corporate clients participating in DCE’s options market rose by 33% year-on-year.
In June 2021, RBD palm olein options was listed as a specified domestic product for overseas traders, becoming China’s first commodity option opened to the world. In 2022, DCE adhered to the approach of opening futures and options to qualified foreign investors (QFIs) while opening more products as specified domestic products. In September, No. 1 soybean, No. 2 soybean, soybean meal, soybean oil, RBD palm olein, iron ore, and LLDPE options were opened to QFIs. In December, No. 1 soybean, No. 2 soybean, soybean meal, and soybean oil options were made available to foreign traders as specified domestic products. So far, DCE has opened up seven options products through the QFI pathway and five options products through the specified domestic product pathway. In terms of oil and oilseeds, all five options have been opened to foreign traders through the above two pathways, thus significantly enhanced the internationalization level of DCE options market. Overseas companies can leverage DCE’s futures and options to hedge price risks, conduct basis trading, strengthen the resilience of the industrial chain, and improve market liquidity.
It is reported that overseas clients from Singapore, Australia, Switzerland, the United Kingdom, and other countries and regions have participated in trading DCE’s options products.
Over the past six years, the options market has made numerous breakthroughs in terms of market size, operation, and openness. Moreover, it has greatly contributed in serving the industry enterprises and the real economy. Going forward, DCE will continue to diversify the options products and accelerate the listing of ethylene glycol and ethenylbenzene options, promoting the full coverage of options tools on active futures products. DCE will also continue to optimize contracts and rules, steadily improve the quality of options market operation, and promote the opening-up of the options market. Furthermore, through projects such as the “Enterprise Risk Management Plan” and “Industry-finance Cultivation Base”, DCE will strengthen its market cultivation for industrial clients, so as to help entities in real economy better use options tools for stable and robust business development.
