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Dalian Commodity Exchange (DCE) will continue to add new futures in the categories of agriculture, forestry and livestock products, and facilitate launch of options in the near future.
At the 8th China International Oils and Oilseeds Conference held in Guangzhou on November 13, Liu Xingqiang, DCE Chairman says that, this year, DCE has seen 5 new futures products winning approvals as well as significant breakthroughs made in market construction, which bodes an unprecedentedly brilliant prospect to DCE. Next, DCE will continue to add new futures products in the categories of agriculture, forestry and livestock, improve the structure of futures products, as well as facilitate launch of options in the near future.
First, Liu introduces the development of the oils and oilseeds futures market. He says that, this year, the import volume of soybeans is estimated to reach a historic high of 66 million tons, with the import volume of RBD Palm Olein predicted to be 6 million tons. Besides, the widest range of price fluctuations for China’s spot goods market for soybean, soybean meal, soybean oil, and RBD Palm Olein have respectively reached 15.67%, 18.52%, 25.82%, and 21.44% this year. As there are many factors influencing the prices of oils and oilseeds, trading of oils and oilseeds futures has remained active over the years. A total of 383 million contracts (unilateral) of DCE’s 5 oils and oilseeds futures products have been traded from January to October this year, accounting for 22% of all futures products traded in China. This manifests the significance of the oils and oilseeds futures in China’s futures market.
Liu also says that, as the most competent and characteristic futures products of DCE, its oils and oilseeds futures have some features as follows.
First, as mature products, they have high market liquidity. If calculated in comparable terms of weight, trade volume for soybean meal is almost twice that of the CBOT in the U.S. in the same period in 2012, with a higher ratio of futures and spot goods than that of the U.S., quite equivalent to the level of developed overseas markets. At the same time, the liquidity ratio of oils and oilseeds futures has been decreasing over the years. Rapid hedging transactions of a large number of open contracts will not lead to wide price fluctuations. As the market is highly capable of assuming and absorbing the demand on high volume trading, development of futures products in this category has grown increasingly mature.
Second, oils and oilseeds futures have attracted in-depth participation of industrial clients. At present, oils and oilseeds futures in China involve clients from the whole industrial chain of upstream, midstream, and downstream enterprises, with 8 leading enterprises participating in hedging trading, including 90% of oil plants with daily oil pressing capacity above 1,000 tons. Up to 9,917 corporate clients in total have participated in the trading of oils and oilseeds futures of DCE this year, with the proportions of delivery cases of and open interests held by corporate clients being 13.15% and 43.16% respectively.
Third, association between the prices of domestic and overseas futures and spot goods is quite close, with adequate co-relation between markets. The correlation coefficient between China’s oils and oilseeds spot and futures prices is above 0.9, with prices on spot goods market turning reasonable in delivery months, and the coefficient of price relation of domestic and overseas cross-border markets is also kept above 0.8. The futures market, in line with spot goods enterprises’ trading habits from overseas market to domestic one, has built a complete system for risk aversion for the whole industrial chain.
Besides, Liu emphasizes that DCE has been constantly adapting itself to the changing spot goods market and industrial development over the years. This year, DCE has taken an array of measures, bettered rules on hedging and arbitrage, issued relevant measures on market expansion and services, and made efforts to lower the costs in trading and delivery, in a bid to facilitate participation of all investors. At present, the functions of the oils and oilseeds futures market such as price discovery and hedging have been given further play, and futures’ prices have not only become the key basis for producers to choose species for planting, as well as setting sale prices, but also an important reference for enterprises in controlling purchase and sale, and making decisions on the most favorable level of storage. Besides, futures such as soybean meal and soybean oil have gradually realized active trading for near-term contracts, with many major industrial participants hedging on the futures market to offset price risks on spot goods market.
Liu adds that, next, DCE will fuel the development of new agricultural futures products and enrich new futures in the categories of agriculture, forestry and livestock products, rationalize the structure of all futures products such as the oils and oilseeds futures, in addition to facilitating launch of options in the near future, with an aim to provide more and efficient tools for risk aversion. Moreover, DCE will strengthen amending relevant rules and systems for its existing futures products, continue to lower costs and enhance efficiency, as well as promote an array of system innovations for swapping of warehouse receipts, goods delivery in 3 steps, and others, so as to facilitate market expansion and services and better meet all needs in market development.
In addition, Liu says that, this is the first year for adopting of the requirements of the 18th National Congress of the CPC. The 3rd Plenary Session of the 18th Central Committee of the CPC, which was held recently, has discussed the significant issue of strengthening all-round reform, as well as pointed out the developing direction for reform in China. This is also the key year for innovation, integration, and development in the financial sector. Building of the Shanghai Free-Trade Zone has provided a better platform for the expansion of the derivatives market, while further opening to the overseas market has presented to us a wide space for development. Further, this year is the 20th anniversary for DCE’s establishment. With concerns and supports from all relevant officials, DCE has seen 5 new futures products winning approvals as well as significant breakthroughs made in market building, which bodes an unprecedentedly brilliant prospect for DCE. Next, DCE will continue to promote improvement for building the futures market, as well as make contributions to giving full play to the decisive role of the futures market in resource allocation, so as to better serve the development of the real economy.
