Date: December 23, 2013
Source: Securities Times

　　Since 2013, the domestic futures market has seen accelerated innovation and development which is worthy of commemoration, for example, the return of treasury bond futures in China’s capital market after 18 years, the launch of 9 new futures products in addition to the other 31 products already in China’s futures market, the continuous trading of 6 futures products, the intensive implementation of mock trading of options, the new round of waves of mergers and capital increase of futures companies, and the all-time highs of trading volume and turnover in futures market. Editor from the Securities Times would like to sort out the top 10 news in the unprecedented development of the futures market in 2013, before embracing a more prosperous 2014.
1. Return of Treasury Bond Futures in China's Capital Market on Sep. 6
　　Treasury Bond Futures was again launched on the China Financial Futures Exchange (CFFEX) on September 6, after 18 years’ absent in China's capital market. As a product enjoying largest trading volume in international derivatives market, treasury bond futures is truly the “King” among financial futures. However, the market participating degree was below the investors’ expectations referring to the experience of a mature market. Currently, the regulators have not yet reached a final conclusion as to what forms should commercial banks with biggest positions and trading volume in spot market take in their participation in treasury bond market, though there is a belief that commercial banks will have a large space for their development in treasury bonds futures market.
2. Launch of 9 New Futures Products in Addition to the Existing 31 Products
　　A total of 8 commodity futures products including coking coal, steam coal, petroleum asphalt, iron ore, egg, japonica rice, blockboard and fiberboard, as well as 1 financial futures product, were launched one after another in 2013, increasing the amount of domestic futures products to 40 so far. Statistics showed that from 2008 to 2012, a total of 13 commodity futures products were launched. Since 2013, as many as 9 futures products have been launched, which is quite uncommon in recent years. Some futures products have been evolved from single products to upstream and downstream along industry chain, indicating remarkable extension in terms of depth and breadth in serving national economy.
3. Everbright Securities Short Sells 7,130 Contracts of Stock Index Futures to Hedge Loss of "Fat-finger" Incident
　　August 16, 2013 was a memorable day. At 11:06, IF1308 contract suddenly rose sharply, up by 70 points within 2 minutes and to the highest of 2,399 points in morning session. According to detailed positions of dominant contract IF1309 announced by the CFFEX, Everbright Futures became a “biggest bear” after increasing its short positions from over 7,023 contracts to over 10,194., The CSRC published on August 18 an announcement on the emergency disposal and preliminary verification as to the abnormal trading of Everbright Securities on August 16. The announcement said that Everbright Securities sold its RMB1.85 billion shares converted ETFs and short sold 7,130 contracts of stock index futures contracts on the same day.
　　As to the abnormal trading of Everbright Securities, the CSRC published the investigation and handling results on August 30, confirming that Everbright Securities had violated several laws and rules, and ordering to confiscate its illegal income of RMB87.21 million, impose penalty of five times the amount of confiscation, totaling RMB523 million, and halt of its proprietary business as well as lifelong prohibition of securities and futures market on four senior managers including former President Xu Haoming.
　　The announcement that Everbright Securities published on the evening of September 6 said that as of closing on September 6, bear contracts of stock index futures purchased for hedging risk in “August 16” Incident has already been closed out. Noticeably, Everbright Securities lost RMB4.3 million in its purchase of bear contracts for hedging risk. While the “August 16” Incident has turned the page, we genuinely wish that there would be less breathtaking moments like this.
4. SHFE Launches Continuous Trading of 6 Futures Products
　　On July 5, 2013, the Shanghai Futures Exchange (SHFE) launched the continuous trading of gold and silver, with products expanding to four non-ferrous metals products of copper, aluminum, zinc and lead on November 20.
　　Both the New York Mercantile Exchange and the London Metal Exchange exert solid pricing power in precious and base metals. However, as trading time in China shares no overlap with that of the two exchanges, domestic futures market fails to follow international prices’ fluctuation and end up with substantial risk of overnight gap. Trading statistics of precious metal for the past five years showed that the launch of night trading has significantly stimulated the market potential. With the uninterrupted enhancement of internationalization of domestic futures market, continuous trading is considered as an important step bringing domestic futures market in line with international market.
5. New Round of Mergers and Capital Increase of Futures Companies
　　For almost two years, a new round of mergers and capital increase have sprung up among futures companies given the background featuring continuing momentum of rapid development and gradual launch of innovative business shown in futures industry. Since this year, there have been 6 cases of mergers and 5 companies’ announcements on capital increase issues, with the amount totaling RMB1.793 billion.
　　On March 26, Changjiang Securities Co., Ltd. made an announcement saying that its subsidiary Changjiang Futures Co., Ltd. received the “Written Reply to Verification and Approval of Merging Xiangcai Qinian Futures Co., Ltd.” from the China Securities Regulatory Commission (CSRC). After completion of this merger, Xiangcai Qinian Futures to be dismissed will handle procedures for registration cancellation at the industrial and commercial administration authorities according to laws, with its sales department integrated into that of Changjiang Securities’.
　　On the evening of June 24, Western Securities Co., Ltd. announced that its subsidiary Western Futures Co., Ltd. received the written reply to verification and approval of equity change from the CSRC. In the equity change, Western Securities completed purchase of Western Futures’ 12.5% equity held by 3 former shareholders of Western Futures, turning Western Futures into a wholly-owned subsidiary of Western Securities.
　　On August 1, Dahua Futures Co., Ltd., wholly owned by Green Futures Co., Ltd. and Shanxi Securities Co., Ltd., released a joint announcement concerning the CSRC’s verification and approval of its merger. Shanxi Securities purchased all equity of Green Futures by way of assets purchase through cash and non-public shares issuance, with the total consideration of the transaction being RMB1.137 billion, hitting a record high in the history of merger in China. Marking the first case of cross-industry merger through capital operation platform for listed companies in domestic securities industry, Shanxi Securities’ purchase of Green Futures has settled down.
　　On August 22, Founder Securities Co., Ltd. announced the proposal of approving its purchase of 60% equity of Beijing CIFCO Futures Co., Ltd. Meanwhile, Beijing CIFCO Futures merged Founder Futures Co., Ltd., the subsidiary of Founder Securities. Beijing CIFCO Futures planned to change its name into Founder CIFCO Futures Co., Ltd.
　　On the evening of September 25, Southwest Securities Co., Ltd. made an announcement saying that it has recently received a written reply from the CSRC, which confirmed its equity change and the fact that Southwest Securities holds 100% equity of Southwest Futures.
　　In addition, on November 26, AVIC Capital Co., Ltd. published an announcement saying that its holding subsidiary AVIC Futures Co., Ltd. plans to purchase 33.33% equity of Jiangnan Futures Co., Ltd. held by Zhejiang Sunshine Group Co., Ltd. with cash of RMB14.5 million. Meanwhile, AVIC Futures merged Jiangnan Futures as a going-on-concern party. After completion of this merger, AVIC Futures still exists and Jiangnan Futures would complete procedures for registration cancellation as the merged party.
　　Mergers are quite beyond domestic futures companies this year. On July 26, GF Securities Co., Ltd. published an announcement on purchasing Natixis Commodity Markets Limited, a British futures company, marking the first case of domestic securities trader’s merger of overseas futures company.
　　In addition, the website of COFCO Futures Co., Ltd. suggested that China Life Insurance Company Limited had already took a stake in COFCO Futures in December last year, becoming its second largest shareholder. It is learnt that China Life Insurance holds 35% shares of COFCO Futures as the second largest shareholder after it contributed almost RMB0.3 billion to this merger.
　　Capital increase among futures companies saw another wave alongside the large-scale purchases in futures companies. On October 29, Southwest Securities announced that it planned to increase capital in Southwest Futures Brokerage Co., Ltd. with cash of RMB0.45 billion. Southwest Futures’ registered capital would jump to RMB0.5 billion after the capital increase. On April 21, Changjiang Securities announced that its directorate approved to increase capital in Changjiang Futures with cash of RMB0.29 billion. As a result, Changjiang Futures’ registered capital had risen to RMB0.6 billion after the capital increase. In May 2013, Donghai Futures Co., Ltd. completed relevant procedures for change at industrial and commercial administration authority, increasing its capital from RMB0.2 billion to RMB0.5 billion. On June 20, Chengdu Brilliant Futures Co., Ltd. announced that it planned to capitalize registered capital in all shareholders with audited capital reserve of RMB58.4166 million and undistributed profit of RMB94.9234 million as of December 31, 2012 according to the same proportion, on the basis of registered capital of RMB46.66 million. As a result, the registered capital of Chengdu Brilliant Futures had been increased from RMB46.66 million to RMB0.2 billion. Besides, Galaxy futures Co., Ltd., as one of the three joint ventured futures companies in China, has also announced its registered capital’s increase from RMB0.6 billion to RMB1.2 billion when disclosing its related financial information of 2012.
6. First 8 Months Hit Record Highs in Both Trading Volume and Turnover
　　Since the beginning of 2013, futures market has seen active trading, up by 100% in both turnover and trading volume, hitting record highs since the birth of futures market statistics in 1993. According to statistics from the China Futures Association (CFA), from January to August, the turnover of domestic futures market reached over RMB185.5 trillion, exceeding the historical record of RMB171 trillion made last year. From January to August, the trading volume of domestic futures market reached over 1.42 billion contracts, just a step away from that of 1.45 billion contracts throughout last year. In the first eleven months of 2013, the trading volume and the turnover of China’s futures market reached 1.895 billion contracts and RMB246.09 trillion, with a year on year increase of 45.86% and 61.93%, respectively. The inflow of industrial funds, driven by the frequent listing of new products this year in domestic futures market, and new capital for speculation of new shares, directly resulted in the sharp rise of trading volume and turnover in futures market.
7. Shanghai International Energy Trading Center Established on November 22
　　The Shanghai International Energy Trading Center was established in the Shanghai Free Trade Zone on November 22, 2013, symbolizing a key step forward for preparatory work for launching crude oil futures. The Shanghai Futures Exchange (SHFE) confirmed that the crude oil futures and trading details have been basically finished so far, with RMB and U.S. dollar available for the choice of the pricing and settlement currency. The China Securities Regulatory Commission (CSRC) has recently approved the SHFE to establish Shanghai International Energy Trading Center in the Shanghai Free Trade Zone, which will be mainly responsible for undertaking preparatory work for establishing international crude oil futures platform. The platform will perform functions of comprehensively introducing overseas investors to participate in domestic futures trading and widen the opening-up of China's futures markets. The establishment of the International Energy Trading Center would mark a solid step forward for preparatory work of launching China’s crude oil futures, indicating that the crude oil futures will soon be listed. All this will contribute to China’s endeavors in striving for discourse power on crude oil pricing.
8. Four Exchanges in All-out Efforts to Conduct Intensive Mock Option Trading
　　As early as in December last year, the Zhengzhou Commodity Exchange (ZCE) had launched sugar futures contracts and standardized designing scheme as well as conducted internal simulation test of sugar option. In the beginning of October this year, the ZCE carried out a market-oriented mock trading competition on sugar futures and options. On October 21, the Dalian Commodity Exchange (DCE) issued the “Notice of Conducting Mock Option Trading towards the Whole Market” to futures companies, kicking off its mock option trading of soybean meal. The China Financial Futures Exchange (CFFEX) started to conduct mock trading of stock index futures towards the whole market from November 8. The Shanghai Futures Exchange (SHFE) started to conduct mock trading for copper and gold futures options from November 19. So far, the four futures exchanges have all conducted mock option trading. The consensus that was reached in the 9th China (Shenzhen) International Derivatives Forum is that “Those with Options Win”. The issue that options are expected to be listed in 2014 is undoubtedly a landmark event in the history of China’s financial derivatives, which indicates an upcoming diversified development era of China's financial derivatives.
9. Gold Prices’ Plunge Proves End of 12-year Bull Market
　　Since the beginning of this year, the gold commodity market has suffered the biggest plunge, ending its 12-year consecutive rising record. As of December 20, gold futures of the COMEX had dropped by 28.2%. The gold market plummeted again and again on April 12, September 12, October 11, November 20 and November 26, and even triggered the circuit breaker. Gold went down on a downhill journey and trapped Chinese Damas who swarmed into the gold mark at rock-bottom price in the first half of 2013. Will gold price enter the bear market? Will gold price see some rebound next year? Will gold purchase be a good choice to fight against inflation? All these questions will be answered by the market eventually.
10. Seek Comments on One-to-Many Approach to Futures Assets Management in Face of Development Bottleneck
　　It has been a full year since the first batch of 18 futures companies had been accredited with business qualification for assets management in late November last year. However, the road of futures assets management business with great expectations is not as smooth and successful as expected, with assets merely between RMB0.8 billion to RMB1 billion at present. Fortunately, futures assets management business finally ushers in a ray of hope after stumbling for a year. Recently, the China Futures Association has issued a draft on seeking public comments on “Administrative Measures on Assets Management Business of Futures Companies” (“Draft for Comments”) to some futures companies licensed with assets management business, requesting to loosen up restrictions for business scope, which means that the “one-to-one” policy restriction on futures assets management services might be removed. The “Draft for Comments” loosens up restrictions by explicitly pointing out that the business scope of futures assets management includes: handle targeted asset management business for individual customers; handle collective asset management business for multiple customers; handle customized special asset management business. The launch of "one-to-many" business will promote the development of futures assets management as well as improve investors’ structure in futures market.