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The “China and Global Derivatives Market Development Forum (CGDDF)” was held in Dalian on October 16. At the seminar on the “Construction and Development of Global Options Market”, Zhu Lihong, Vice President of Dalian Commodity Exchange (DCE), said that the listing and trading of China’s first options product, soybean meal options, in DCE has opened a new era of commodity options in China.
Since the listing of soybean meal options till the end of September this year, the average daily trading volume and open interest were 34,000 contracts and 67,000 contracts respectively; 12,000 clients have received the trading permit, some 7,000 of which have taken part in options trading. Currently, the average turnover rate of soybean meal options is about 0.2 and the bid-ask spread and market depth of dominant flat-value contracts have approached the level of a mature market.
Zhu Lihong stressed that the basic futures contracts’ importance for the mature option market has been perceived in promoting the stable operation of soybean meal options. Taking soybean meal for example, soybean meal futures has been the biggest futures contracts in the world for consecutive years, and application effects of the industry and the market has been great for soybean meal futures, which have created conditions for the successful listing, stable operation and preliminary functioning of soybean meal options. Meanwhile, the options market should have reasonable investor structure. There is an obvious trend in the institutionalized investment in soybean meal options. The trading volume and open interest of corporate clients accounted for 62% and 53% respectively, showing an obvious institutionalization feature. Corporate clients include market makers, industry clients, information management products and investors of high-frequency quantitative and program trading. This is a typical feature of a mature market and also the direction of future efforts. In addition, commodity futures and options should play a role in industry development. The soybean meal options have presented good performance in assisting domestic and overseas industry clients in improving the detailed strategy of risk management since its listing. In the whole industry chain of soybean, all enterprises, from the upstream crushing enterprises to the downstream feeding and breeding enterprises, have been active in using options.
Zhu Lihong said that DCE will further enhance the market operation quality for soybean options and cultivate professional market maker teams to provide market with good liquidity; it will encourage industry clients to make better use of the options market and fully demonstrate commercial value of options. Besides, DCE will launch more options products. It has submitted the application of listing iron ore options to the China Securities Regulatory Commission and will strive for the early listing of corn options. To meet the individualized and diversified demand of the industry and the market, DCE will continue to promote the construction of an over-the-counter market platform and get through the floor market and the over-the-counter market, thus providing investors with sophisticated risk management instruments.
