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These Guidelines are formulated pursuant to the Detailed Rules for Futures Trading of Zhengzhou Commodity Exchange, Measures for the Administration of Trader Suitability Requirements for Futures Trading of Zhengzhou Commodity Exchange (hereinafter “the Measures”) and other relevant regulations, for the purposes of further clarifying the trader suitability requirements for futures trading on Zhengzhou Commodity Exchange (hereinafter “the Exchange”) and guiding futures brokerage members (hereinafter “FB members”) and overseas brokers, which are collectively referred to as account-opening institutions, to comply with trader suitability requirements.
Ⅰ. Requirements for Management of Trading Permissions
ⅰ. The Exchange shall implement trading permission management system for trading codes. FB members may open trading codes for the overseas clients who have passed or can be exempted from suitability assessment, and shall, after the overseas clients obtain the trading codes, open the trading permissions of the Exchange’s specified futures and option contracts and close the trading permissions of other listed products for the overseas clients. The FB members shall, based on China’s domestic clients’ wills, open trading permissions of option contracts or specified futures contracts for them, and shall not open such trading permissions until they have passed suitability assessment or unless they can be exempted from suitability assessment.
ⅱ. Eligible clients may apply to account-opening institutions for increases in or closing of trading permissions of listed products.
Ⅱ. Requirements for Futures Trading Literacy
Related personnel of institutional clients and individual clients shall have basic knowledge of futures trading and understand relevant business rules of the Exchange. Account-opening institutions may get information about their clients’ actual level of knowledge on futures trading in the following ways:
ⅰ. Knowledge Test. Clients shall login in the futures investor suitability knowledge test platform of China Futures Association (hereinafter “the CFA”) to complete the online knowledge test. The maximum score of the test is 100, and the passing score is 80. The test shall be personally finished by individual clients or the personnel designated by institutional clients to place orders. Surrogate exam-takers shall be not allowed.
ⅱ. Letter of Undertaking. Overseas clients may provide Letter of Undertaking to certify that they have the knowledge of futures trading as required by the Measures and will assume all the consequences of making false commitment. The Letter of Undertaking shall specify that the related personnel of institutional clients and individual clients have basic knowledge of futures trading and understand relevant business rules of the Exchange;
Ⅲ. Requirements for Trading Experience
ⅰ. Requirements for Simulated Trading Experience. Clients shall provide clearing statements and other documents issued by securities companies and futures brokers to certify that they have records of no less than twenty (20) executed orders in the simulated trading conducted through the joint testing system or simulated trading system of China’s domestic trading venues for no less than ten (10) accumulative trading days.
ⅱ. Requirements for Domestic Trading Experience. Clients shall provide clearing statements and other documents issued by securities companies and futures brokers to certify that they have records of no less than ten (10) executed orders in futures or option trading, or in trading of any other centrally-cleared derivatives (such as swap), within the past three (3) years on any of the domestic trading venues.
ⅲ. Requirements for Overseas Trading Experience. Clients shall provide the breakdown of trading records, clearing statements or other documents issued by overseas trading venues regulated by its competent futures regulatory authority that has a memorandum of understanding on regulatory cooperation with the China Securities Regulatory Commission (hereinafter “the CSRC”) to certify that they have records of no less than ten (10) executed orders in futures or option trading, or in trading of any other centrally-cleared derivatives (such as swap), within the past three (3) years (the overseas trading records hereinafter as the “recognized overseas trading records”).
ⅳ. One (1) order which is filled in several executions shall be recorded once. All the above trading records shall be about the trades that have successfully been executed, no matter through real or simulated trading.
Ⅳ. Requirements for Available Balance in Margin Accounts
ⅰ. The margin rates charged by account-opening institutions shall be the basis for calculating the clients’ available balance in their margin accounts. Overseas clients may pledge FX as margin. The available balance shall include both Renminbi (hereinafter “RMB”) and FX funds. The foreign currency that can be pledged as margin and the pledge rate shall be published by the Exchange separately.
The FX shall be converted into RMB by following conversion formula:
The balance in RMB after pledge = the amount of FX × the central parity rate of the FX against RMB published by China Foreign Exchange Trade System × the pledge rate of FX
ⅱ. When FB members directly applying for opening trading codes or trading permissions for clients, they shall make sure that the clients’ available balance in their margin accounts is up to the Exchange’s stipulated amount five (5) consecutive business days before applying for trading codes or trading permissions;
When overseas brokers applying for opening trading codes or trading permissions for clients, they shall make sure that the clients’ available balance in their margin accounts is up to the Exchange’s stipulated amount five (5) consecutive business days before applying for trading codes or trading permissions;
Ⅴ. Compliance and Integrity Requirements
Account-opening institutions shall, by a variety of means, get clients’ integrity information and make comprehensive assessment of the clients’ credit by utilizing the credit reference systems of various countries or regions. Account-opening institutions shall make clear to the clients the regulations on or requirements for prohibitions or restrictions from engaging in futures trading.
ⅱ. Account-opening institutions shall check clients’ integrity information by utilizing the resources available in the Securities and Futures Market Illegality and Dishonesty Record Inquiry Platform of the CSRC, Industry Information Management Platform of the CFA, the name list of seriously dishonest persons in the financial market, etc. Where the account-opening institutions can not make sure whether the clients meet the compliance and integrity requirements under the Measures, they shall require the clients to provide Letter of Undertaking to certify that they have satisfied the requirements under the Measures and will assume all the consequences of making false commitment.
Ⅵ. Internal Policy Requirements for Institutional Clients
When an account-opening institution applies to the Exchange for a trading code or trading permission on behalf of an institutional client to participate in the trading of any listed contract to which the trader suitability requirements apply, the account-opening institution shall make sure that the client has established sound internal control, risk management and other futures trading management rules or procedures relevant to businesses such as trading strategy, order placement, fund transfer, physical delivery and risk management.
Ⅶ. Exemption from Suitability Assessment
ⅰ. The following clients shall be exempted from the suitability assessments of trading literacy, trading experience and available balance in their accounts by account-opening institutions.
1. clients having obtained the trading permissions of any product listed on a domestic exchange;
2. clients having obtained the trading codes for financial futures contracts;
3. clients having obtained the trading permissions for the option contracts listed on any domestic securities exchange;
All the aforementioned clients shall provide supporting documents to prove that they have obtained the aforementioned trading permissions.
ⅱ. An account-opening institution shall make full use of known information and assessment reports. The client having obtained the trading permission by passing suitability assessment of a certain product on the Exchange can automatically obtain, through the same account-opening institution, the trading permissions of the Exchange’s other listed products to which the trader suitability requirements apply.
ⅲ. When an account-opening institution applies to the Exchange for trading codes or trading permissions on behalf of the following clients to participate in the trading of the listed contracts to which the trader suitability requirements apply, the account-opening institution may choose not to assess the clients’ trading literacy, trading experience and the available balance in their accounts.
1. professional investors satisfying the requirements mentioned in the Measures for the Suitability Management of Securities and Futures Investors;
2. clients having obtained the trading permissions of any listed product that the trader suitability requirements apply to, and applying for trading permissions of the same product through a different account-opening institution. The clients shall provide supporting documents to prove that they have obtained such trading permissions;
3. clients having records of executed orders in futures or option trading, or in trading of any other centrally-cleared derivatives, for no less than fifty (50) accumulative trading days within the past one (1) year on any of the domestic trading venues, or recognized overseas trading records for no less than fifty (50) accumulative trading days within the past one (1) year. Such clients shall provide the breakdown of executed orders, clearing statements or other credentials;
4. market makers, special institutional clients and other traders as recognized by the Exchange. The special institutional clients shall refer to futures brokers, securities companies, fund management companies, trust companies and other financial institutions, as well as social security companies, eligible overseas institutional investors and other institutional clients whose assets shall be managed in segregated accounts in accordance with laws, administrative regulations and rules.
Ⅷ. Other Requirements
ⅰ. The requirements for the application for trading codes shall also apply to the application for trading permissions. Account-opening institutions shall properly keep clients’ account-opening materials which shall include the supporting documents on clients’ trading literacy, trading experience, available balance in their accounts, their compliance and integrity practices as well as their application materials for trading permissions. The retention time of these materials shall be in consistent with the requirements prescribed in local laws and regulations, and the account-opening institutions shall keep the materials confidential unless they are required to cooperate with legal investigations or inspections in accordance with the law. The clients shall not make any report, representation, explanation or statement which is false, misleading or omits important facts.
ⅱ. Account-opening institutions shall report to and file with the Exchange the trading codes of their clients within three (3) business days after the clients’ trading permissions for option contracts or specified futures products have been opened, and shall cancel such filing with the Exchange if their clients’ trading permissions have been closed due to account cancellation or failure to maintain eligibility for suitability requirements within three (3) business days.
ⅲ. In case that account-opening institutions have relevant documents that are able to demonstrate the clients’ trading records, then such clients may be exempted from providing supporting documents on trading records.
ⅳ. In case that a client asks an account-opening institution to provide supporting documents on his trading experience and trading permission, the account-opening institution shall do as the client asks according to the actual conditions.
Ⅸ. Supplementary Provisions
The Exchange shall reserve the right to interpret these Operational Guidelines.
(The English version is for reference ONLY. The Chinese version shall prevail if there is any inconsistency.)
