To promote the preparations for the businesses related to the market making among the market institutions and speed up the cultivation of potential market makers, Dalian Commodity Exchange (DCE) will organize the market makers with the intention to conduct the cooperative test for the options market making in the simulation trading environment. The cooperative test is planned to be implemented after the Spring Festival of 2015, and it is hoped that the institutions with the intention could be active in registering for participation and make relevant business and technical preparations in advance. The specific matters are notified as follows:
1. General arrangements for the cooperative test
(A) Participants
the institutions who intend to participate in the options market making business of DCE and have the trading system and business teams for the market making
(B) Product for market making
Soybean meal option contracts
(C) Initial fund and initial position
The initial fund of each market making trading code is RMB 100 million, with the fund transfer between trading accounts and bank accounts not permitted. The initial derivatives position is 0.
(D) Trading rules
Please refer to the “Measures of DCE for Management of Options Trading” (Draft), the “Measures of DCE for Management of Options Market Making” (Draft) and DCE’s other related futures rules.
|
futures position limit of client |
corresponding options position limit of client |
futures position limit of market maker |
options position limit of market maker |
|
ordinary month |
unilateral position of futures contract ≤ 200,000 |
20,000 |
double the contracts of the position limit of the futures contract for the target of the client |
50,000 |
double the contracts of the position limit of the futures contract for the target of market maker |
unilateral position of futures contract ﹥200,000 |
unilateral position ×10% |
unilateral position × 25% |
|||
from the 10th trading day in the month before the delivery month |
5,000 |
—— |
12,500 |
—— |
|
delivery month |
2,500 |
—— |
2,500 |
—— |
The calculations for specific options position limits can be found in the attachment of “Draft Measures of DCE for Management of Options Trading”.
(E) Handling of violations
During the cooperative test, the qualification for participating the test will be cancelled if the initial position is not 0 or the operation of transferring the funds from the bank accounts to the trading accounts is found.
During testing it is strictly forbidden to commit violations such as contra trade and malicious market manipulation independently or in conjunction with other institutions, and once the violations are found, the market makers will be required to explain their behaviors through their futures companies. Once the violations are affirmed, the qualification for the test will be cancelled immediately.
(F) Arrangement for process
1. The market makers with the intention to participate in the cooperative test provide relevant registration materials before 17:00 on January 5, 2015.
2. Before January 16, on the basis of the registration materials, DCE will select less than 40 market makers for the cooperative test and inform the participating institutions.
3. Before February 17, the market makers to participate in the cooperative test complete the arrangements of DCE for the system upgrading for the options simulation environment, opening accounts, accessing to the test and other related work.
4. After the Spring Festival, the participants offer market making in the cooperative test.
5. The cooperative test ends on April 10.
6. Before April 17, the market makers participating in the cooperative test submit the test reports and related materials.
7. DCE will record the registration and participation of the market makers in the test as important reference materials. And DCE will make selections on the basis of the quotation quality, the profitability and the test reports, with the market makers generating better results in the cooperative test to be rewarded.
(G) Technical preparations and system hosting
In order to provide better business support for the market, DCE has recently released the "option phase-4 trading interface", including the functions for market making such as bilateral quoting and the new data compression algorithm. The producers of the OTC systems of the futures companies have carried out the system upgrading based on the interface. Because of the adoption of the new data compression algorithm, the OTC trading systems that have not been upgraded to the "option phase-4 trading interface" will not be able to link to and participate in the test (currently the X-Speed OTC trading system of the Futures Company has completed the upgrading).
The market makers and the corresponding futures companies participating in the test can select suitable OTC trading systems depending on the circumstances to participate in the test. During the test, the market makers and the corresponding futures companies can, according to their demands, select some of or all of the three technical supporting programs (Attachment 2) provided by DCE free of charge.
2. Registration and application
The market makers with the intention should submit the following materials:
a. Application Form (Attachment 1);
b. the basic information of the company: registered capital, net assets, business scope, last year's financial statements, basic information of the shareholding companies, as well as the report on the company and shareholding companies participating in the market making transactions in other markets in the past.
c. the members of the market making team, the relevant resumes, and the information of conducting market making in other markets;
d. introduction to the market making software system and the information of the operation of the system in other markets;
e. market making schemes and strategies: quoting strategies, risk control measures, income strategies, and contingency plans, as well as report on the application of the schemes and strategies in other markets;
f. information of participation in the options simulation trading and market making trading in DCE and other markets.
Rule for naming of electronic materials: (abbreviation of unit) registration for cooperative test for market making. The application form should be a scanned copy sealed with the stamp of the applying unit and the certificate of organization and institution code should be a scanned copy sealed with the stamp of the applying unit.
3. Materials to be submitted after the end of the cooperative test
After the end of the test, the following materials should be submitted in a timely way.
a. the report on the cooperative test;
b. the final statement for market making trading account on the trading day before the test;
c. transferring of funds between the trading account and the bank account during the test;
d. daily profits and losses of the market making trading account during the test;
e. interests and positions of the market making trading account on the day of the end of the test.
Rule for naming of electronic materials: (abbreviation of unit) report on market making cooperative test. Except the report on the test, all other materials should be scanned copies sealed with the official stamp of the futures companies.