Chinese financial regulator defends futures markets

Trading in China’sfutures market has had no bearing on price volatility in the underlying Chinese spot market, according to that market's main financial regulator.

Xinghai Fang, vice chairman at the China Securities Regulatory Commission (CSRC), told a conference "futures did not help or cause the spot price to fluctuate", referring to "the big price fluctuation of somefutures products since beginning of this year".

“The futures market will play an increasingly important andpositive role in China’s supply-side structural reform,” added the vice-chairman, speaking atthe 12^th China International Derivatives Forum held on December 2-4 inShenzhen.

Fang identified the following steps to help build a strong futures market: to reform the market demand-oriented futuresproduct listing mechanism; to better meet the risk management needs of the realeconomy; and to promote the development of futures business institution. 

Thereis also the need to service the “one belt one road” strategy, to “strictlyregulate the market in accordance with the law” and “crack down on illegaland disguised futures activities".

Mingwei Wang, chairman of the China Futures Association, also backed a plan to build “an international and professionals futures andderivatives industry exchange platform with ‘openness, integration, innovation,development’ as its purpose".

During the conference, the China Futures Association signed amemorandum of cooperation with the China Iron and Steel Association and theTokyo Commodity Exchange, to “exchange in information, business,training, research and other aspects".

Fang also addressed the slump in both futures and commoditytrading that China has witnessed in the last few months.

He stated during the conference that “CSRC will continue topromote and perfect relevant system process, develop and launch more productswhich will meet the demand of the real economy, including launching crude oilfutures, commodity options like sugar, soybean meal".

The senior panelists from Chinese exchanges and futurescommission merchants (FCMs) also called on the regulator to launch commodity options.

The CSRC said on November3 it had granted preliminary approval to the Dalian Commodity Exchange (DCE) the second largest Chinese market, to launch a new futures contract basedon petrochemical used in the production of anti-freeze and polyesters.

Chinesecommodities and futures exchanges saw heavy trading losses inSeptember. The losses capture the overalldisappointing third quarter, in which trading volumes in Asia fell by a fifth.

The Shanghai Futures Exchange, the largest Chinese futuresmarket, saw September’s volumes drop by a quarter on September last year to 99million lots, according to Euromoney TradeData.

The Dalian Commodity Exchange, the second largest Chinesefutures exchange, saw trading volume fall 16.6% to 86.7 million lots while theZhengzhou Commodity Exchange, the third Chinese market by volume, said tradingwas down 17% last month to 59.7 million lots, according to Euromoney TradeData.

The 12th China (Shenzhen) International Derivatives Forum was held on 2-4 December in Shenzhen. 

The event was jointly organized by China Futures Industry Association and Shenzhen government. This year’s theme was “Industry-Finance Integration and Financial Technology -The opportunities & challenges of the derivatives market under the background of supply-side reform”.   

More than ten overseas exchanges and over 100 foreign institutions sent representatives to the event. More than 1400 financial derivatives experts, scholars, elites from banks, securities, funds, futures and listed companies attended the event.