Date：March 26, 2015
Source:Modern Bankers

China’s Futures Trading Scale in 2014 Setting New Record
According to the latest statistics of the China Futures Association (CFA), the accumulated trading volume of China’s futures market in 2014 is 2.505 billion contracts and the accumulated turnover is RMB291.98 trillion, up by 21.54% and 9.16% respectively on year-on-year basis. Specifically, the accumulated trading volume of China’s commodity futures market is 2.288 billion contracts and the accumulated turnover is RMB127.96 trillion, up by 22.48% and 1.18% respectively year-on-year; the accumulated trading volume of China’s financial futures market is 217 million contracts and the accumulated turnover is RMB164.01 trillion, up by 12.41% and 16.31% respectively year-on-year.
The trading volume in 2014 exceeds that in 2013 (444 million contracts) and the turnover also exceeds that in 2013 (RMB24.4 trillion), both creating the record high of China’s futures market. The record-hitting of the trading scale of China’s futures market symbolizes a great breakthrough. According to the prediction of the Research Institute of Founders CIFCO Futures, the trading volume of China’s futures market in 2015 will reach 3 billion contracts and the turnover RMB350 trillion.
According to the statistics of relevant domestic institutions, the customer equity of China’s futures market exceeds RMB300 billion, which also breaks the record. The development of China’s futures market will open a new milestone and the great development for China’s futures companies is coming under the promotion of futures brokers, investment consultation, assets management, and risk subsidiaries and under the background of the launch of new futures products and options soon.
Reasons for the Increase of Futures Trading Scale in 2014
Judging from the trading data of futures market in 2014, the trading volume of stock index futures has risen sharply due to the continuous increase of the stock in the latter half of 2014 and the sharp rise of stock index. As most products of commodity futures have continued to go down, the bear market is more likely to present. On the whole, the pick-up of both the commodity futures and the financial futures in 2014 has made possible the off-season increase of the trading volume of futures market in the fourth quarter, but the main driving force is the financial futures market.
We believe that the macro environment, trading modes, and the trading features of domestic futures market in 2014 have prompted the great changes in China’s futures market in 2014 and the main reasons are as follow:
First, China’s futures market is still one dominated by commodity futures market and the golden developing period for the commodity futures market is just coming. Risk management, arbitrage, and funds for investing are the three major engines for the increase of the trading volume of the commodity futures market, which is the key to the record-breaking of the trading volume of China’s futures market in 2014.
Second, the great increase of the trading volume of the financial market is the key factor promoting the record-breaking of both the trading volume and the turnover of China’s futures market.
Third, the trading volume of futures products in the steel and building materials industry chain, which are distributed among the three commodity futures exchanges in China in 2014, has presented sharp increase, and the great contribution of the trading volume of the futures products in the steel and building materials industry chain is the vital force making China’s commodity futures market becoming the No.1 around the world.
Fourth, the trading volume of gold and silver futures, both of which are precious metals products, has presented sharp increase in 2014. Stimulated by such factors as the monetary policy change of the U.S. Federal Reserve, the reduction of interest of the Central Bank of China, and the public voting for gold in Switzerland, the gold and silver futures have attracted large amounts of capital and the gambling between the parties being optimistic and pessimistic about the market is increasingly severe. The trading volume of four nonferrous metals (copper, aluminum, zinc, and lead) in 2014 is 126 million contracts, exceeding the 80 million contracts in 2013 and showing an increase of 57.87%; and the trading of aluminum, zinc, and lead futures in 2014 are brisker than that in 2013, up by 260% year-on-year.
Fifth, many dominant products among China’s agricultural futures products have presented sharp increase in the trading volume in 2014. The trading volume of rapeseed meal, soybean meal, and white sugar futures goes up significantly and the sharp increase of the trading volume of the dominant active products among the abovementioned agricultural products has helped to promote the pick-up of the trading in the agricultural futures market.
Sixth, the great increase of the trading volume of such energy and chemical futures as PTA, natural rubber, plastic, and methanol in 2014 has also promoted the sharp increase of the trading volume of China’s futures market.
Seventh, China’s futures market has launched the after-hours trading, or the night trading, in an all-round way in 2014. Till December 31, 2014, altogether 23 products among the three commodity futures exchanges had participated in the after-hours trading program, in which institutional and individual investors can take part in the trading activities in various boards of the abovementioned products at night. The after-hours trading volume in 2014 has taken an important proportion in the overall trading volume of China’s futures market, which has become a major engine promoting the record-breaking of both the trading volume and the turnover of futures market in 2014.
Eighth, the global economic situation and the new normal of China’s economy in 2014 have constituted the macro environment for the further development of China’s futures market. The demand shrinking in the bulk commodity market has increased the downward risks in price; the enthusiasm of risk-avoiding funds and hedge funds entering into the commodity futures market has not been reduced as influenced by the price decline; and the general increase of the domestic stock board and the great pick-up of nearly 50% of stock index have attracted a large amount of capital to participate in the stock index futures and commodity futures markets. All these have promoted the rise of the incremental capital in China’s futures market this year.
10 Events of China’s Futures Market in 2014
Many events occur in China’s futures market in 2014, such as the institutional law, the innovation conference, the launch of new products, the preparation of new products, the assets management, the allowance of businesses of subsidiaries, the commodity ETF, and the carry-out of overseas business. All these have attracted the attention from all circles.
1. Accelerated Progress of Enacting China’s 1st “Futures Law”
According to the Legislation Plan of the 12th NPC Standing Committee, the Futures Law is listed into the second-category legislative programs in 2014 by the NPC Standing Committee. The Financial and Economic Affairs Committee of the National People’s Congress is in charge of making the draft and the “Team of Drafting Futures Law” is established, symbolizing the official launch of the legislation of the Futures Law. China’s futures and derivatives market has entered into a new development period in 2014 and a basic law for the futures industry is thus needed to standardize, guide, and safeguard the further development and continuous innovation of the futures and derivatives market.
2. New “Nine Opinions” Pointing out Important Guidance for the Development of Futures Market
“Some Opinions of the State Council on Further Propelling Sound Growth of the Capital Market” (“Nine Opinions” for short) was released on May 9, 2014. The old “Some Opinions of the State Council on Promoting the Reform and Opening-up and the Stable Development of the Capital Market” had pointed out a clear development road for China’s futures market which was in the low period at that time. The new “Nine Opinions” has softened the business access of futures companies and made clear the innovative development direction of futures companies. It will expand the scale of professional institutional investors and guide the orderly development of the internet business of futures companies. Besides, it requires futures companies to strengthen the protection on small and medium-sized investors and intensify their information sharing and coordination and cooperation with futures supervisory departments.
3. China Futures Innovation Conference Making Clear Future Direction for Futures Companies
At the 1st Futures Innovation Conference held on September 17, 2014, the China Securities Regulatory Commission (CSRC) issued the “Opinions on Further Promoting Innovative Development of the Futures and Derivatives Industry”, which made clear futures operating agencies’ basic orientation as the “derivatives service providers” and their two basic functions of “risk management” and “assets pricing”. In addition, it will earnestly promote the future development of the innovative business of futures companies, speed up launching the business of collective assets management and the pilot of futures companies participating in the overseas futures trading on behalf of domestic customers, further expand the pilot scale of setting up risk management subsidiaries by futures companies, and support futures operating agencies to set up over-the-counter derivatives contracts on their own. Besides, it will encourage qualified futures companies to carry out group management and strive to build a group of derivatives service groups with international competitiveness and with risk management and assets pricing as the core businesses.
4. “Supervision and Management Measures for Futures Companies” Officially Released and Implemented
The “Supervision and Management Measures for Futures Companies” has improved the business scope of futures companies, categorized the businesses that futures companies can engage in into four levels – those that can be engaged in, those that need examination and approval, those that need registration and filing, and those that can be engaged in after approval, and also left room for the future license management and mixed operation in advance.
5. Three Commodity Futures Exchanges All Opening After-hours Trading
In 2014, Shanghai Futures Exchange, Dalian Commodity Exchange, and Zhengzhou Commodity Exchange have successively launched 21 products to engage in the after-hours trading program, which, coupled with the gold and silver futures launched in 2013, has made China’s futures market have 23 products (half of the products in the futures market) engaged in the after-hours trading program. 16 most active products in the futures market, such as rebar steel, iron ore, PTA, soybean meal, rapeseed meal, coke, and coking coal, are included.
6. Increase of Futures Companies Engaging in Reorganization and Merger
2014 is the high time in the development of China’s futures market for futures companies to conduct reorganization and merger or change shareholders. The reorganization of existing futures companies, purchasing domestic futures companies by foreign capital, and purchasing futures companies by domestic financial holding groups are the obvious features of the organization and merger in the industry in 2014. And the alliance, shares offering, and cross holding of financial license among futures companies will continue.
7. “One-to-many” Futures Assets Management Business Allowed
The assets management business of futures companies was officially opened on December 4, 2014 and the CFA officially released the “Management Rules of Assets Management of Futures Companies (Pilot)” which was to be implemented from December 15, 2014. As a result, futures companies are permitted to set up subsidiaries specially engaging in assets management and the funds owned by futures companies or subsidiaries can be invested in the assets management plan made by the futures companies themselves. The current opening of the “one-to-many” business has opened huge room for the future wealth management of futures companies and paved a new road for their transformation.
8. Crude Oil Futures as Leading Commodity Approved to Be Launched
After over ten years of research and development, the crude oil futures were finally approved to be launched after nearly four years of preparation. On December 12, 2014, the CRSC officially approved Shanghai Futures Exchange to conduct crude oil futures trading at Shanghai International Energy Exchange (INE) and the launch of China’s crude oil futures has entered the final countdown. The operation of crude oil futures will promote the reform progress of the oil market system, provide enterprises in the crude oil industry chain with effective risk management tools, guide the reasonable resources allocation through the marketized price forming mechanism produced by futures, and enhance the oil industry’s international competitiveness and the ability of resisting price risks. At present, the INE has mapped out the overall scheme for the crude oil futures and formulated detailed business rules system.
9. Approval of SSE’s Stock Option Triggering Option Fever
On December 5, 2014, the CSRC solicited public opinions on the “Administrative Measures on Pilot Program of Stock Option Trading (Draft for Comment)” and the supporting guideline “Guidelines for Securities and Futures Agencies to Participate in Pilot Program of Stock Option Trading (Draft for Comment)”, symbolizing that the stock option and the ETF option to be launched at the Shanghai Stock Exchange (SSE) have entered the substantial preparation period for their launch, and futures companies will also take part in the business transaction and covered position-opening businesses of stock option.
10. Implementation of Commodity ETF Guideline Attracting Market Attention
On December 19, 2014, the CSRC officially released the “No.1 Guideline for the Operation of Public Offering Securities Investment Funds – the Guideline for the Exchange Traded Fund of Commodity Futures”, which were to be implemented from the day of its releasing. The implementation of the commodity ETF guideline can get through the two markets of securities and commodities, enrich the investment products and risk-avoiding tools, and satisfy investors’ demands of resisting the inflation risk and diversifying asset allocation. It can also introduce institutional investors to participate in the investment in the commodity futures market and improve the investor structure of the commodity futures market. Besides, it can enhance the liquidity of the commodity futures market and help to strengthen financial intermediaries’ capacity of serving investors and the real economy.
On December 31, 2014, the CSRC solicited public opinions on the “Provisional Measures on Managing Futures Trading of Specified Domestic Products by Overseas Investors and Brokers (Draft for Comment)”, which will lay a legal foundation for crude oil futures to introduce overseas investors to participate in China’s futures market.