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On December 19, Dalian Commodity Exchange (DCE) launched the commodity swap business, indicating that China’s futures exchanges have officially started to play the role of financial infrastructure in the OTC commodity derivatives market, and provide comprehensive services such as the trading registration and settlement for financial institutions and entity enterprises in their OTC commodity derivatives business. The representatives from industry associations, financial institutions and industry enterprises attended the launching ceremony.
Li Zhengqiang, DCE Chairman and Secretary of DCE party committee, said in his speech that the launch of the commodity swap business is an important achievement of DCE’s years of continuous efforts in advancing the strategic transformation to diversity and openness and propelling the improvement of the derivatives market system. From the perspective of the experience in the international market, the swaps are widely used by the industry enterprises in risk management as one of the three major derivatives instruments besides futures and options as well as a core instrument in the OTC derivatives market. For a long time in the past, with only futures and no options and swaps, China’s futures market was characterized by a single instrument and level, and the floor trading market was relatively developed with the OTC market growing sluggishly. In early 2015, DCE introduced the development strategy of “Focusing on the major tasks such as the launch of the soybean meal options, the internationalization of the iron ore futures and the construction of the OTC market, and transforming from a single and closed commodity futures exchange to a diversified and open comprehensive derivatives exchange.” With years of hard work, DCE launched the soybean meal options, China’s first commodity options product on March 31, 2017, filling the gap of the commodity options in China; on May 4, 2018, DCE implemented the business of introducing overseas traders into the iron ore futures, achieving the internationalization of a domestically traded futures product for the first time.
In recent years, based on the guideline and principle of “building platforms, providing services, enhancing credit and guarding against risks”, DCE has vigorously explored the ways and means of developing the OTC market. Today, with the launch of the commodity swap business, DCE has initially established a system of diversified derivatives products including the existing futures and options and the newly introduced swaps, basically set up a multi-level derivatives market framework including both the floor trading and the OTC markets, and roughly formed an open derivatives market structure involving both domestic and overseas factors, indicating that DCE has realized the strategic transformation toward diversity and openness, and China’s futures exchanges have started to provide the OTC market business with rules and systems, platform support and the services of trading registration and settlement.
Li pointed out that the introduction of the commodity swap business is an important exploration for DCE to vigorously implement the fundamental purpose of serving the real economy. For a long time, China faces a profound contradiction in the development of the futures market, that is, how should such a highly standardized market for contract rules better meet the individualized demands of industry enterprises for risk management? In recent years, DCE has successively launched the pilot businesses for the OTC market such as the warehouse receipts switch, the warehouse receipt service providers, the OTC options, the “insurance + futures”, the basis trade and the commodity indexes, so as to better meet the demands of the industry enterprises for risk management. In 2017, DCE joined hands with Shanghai Pudong Development Bank, Yongan Capital and Zhejiang Topchance Petrochemical Co., Ltd. to carry out the pilot projects of the commodity swap business, opening up a new path for industry enterprises to manage the commodity price risks. Today, DCE has officially launched the commodity swap business on the comprehensive business platform for the OTC market with a new mechanism and channel basically established for the interconnection between the futures and the spot markets as well as the floor trading and the OTC markets, marking a new level for DCE to expand and deepen the service for the real economy through various instruments and means.
Li stressed that the introduction of the commodity swap business is an important measure for DCE to energetically implement the concept of joint efforts and win-win development and seek common growth with all market participants. With nearly 30 years of exploration and gradual development and growth, China's futures market has been increasingly inseparable from the joint participation of banks, insurance companies, securities companies, funds and other institutions. At the same time, the development of the futures market will also provide new business growth points for the institutions. The launch of the commodity swap business is another important business innovation of DCE in continuously pushing various institutions to integrate resources, deepen cooperation and realize common development, which is of great significance to the development of the futures market and the financial institutions. The commodity swap business has received positive response from all market participants, as four banks have been qualified as the designated depository banks for comprehensive businesses, and 26 financial institutions such as banks, securities companies and futures risk management subsidiaries have obtained the qualification for the commodity swap trader, laying a solid foundation for the operation of the commodity swap business.
Li also said that DCE will bring its functions and services into full play as an important infrastructure of the financial market, make effective efforts in supplying systems, technologies and services, and strive to provide fair, safe and efficient services and guarantees for both sides in trading. DCE will work with all market participants to implement the working principle of “consolidation, enrichment and improvement”, accelerate the development of new products and instruments, energetically integrate the OTC market businesses such as the commodity swap, the warehouse receipts switch and the basis trade, and steadily expand the opening up of the market, so as to build DCE into a diversified and open world-class derivatives exchange in an all-round way. It is hoped that more financial institutions and industry enterprises will well arrange the participation in and make full use of the new platform and the new instrument, so as to give better play to the role of the derivatives market in serving the real economy.
Wang Fenghai, CEO of DCE, hosted the launching ceremony on the day. At the ceremony, DCE Chairman Li Zhengqiang, DCE CEO Wang Fenghai and DCE Vice President Zhu Lihong presented the licenses to the four depository banks such as Shanghai Pudong Development Bank and Bank of Communications, and 26 traders such as Industrial Bank, Yongan Capital and Galaxy Securities. China Minsheng Banking Corp., Ltd. exchanged the letters of intent on the trading of commodity swaps with five risk management subsidiaries as traders such as Jinrui Capital and Xinhu Ruifeng.
