NO 239 – JANUARY 2013
2012 WFE market highlights

WFE Focus January 2013

FOCUS: Could you give us a bit of background about your exchange?

ZCE: Zhengzhou Commodity Exchange (ZCE), the first experimental futures market approved by the State Council of China, was established on October 12, 1990. ZCE has been under direct supervision of the China Securities Regulatory Commission (CSRC) since 1998.

Currently there are 11 different types of futures products listed at ZCE, these include Wheat Futures (Strong Gluten Wheat and Common Wheat), Cotton Futures, White Sugar Futures, Pure Terephthalic Acid Futures (PTA), Rapeseed Oil Futures, Early Long-grain Nonglutinous Rice Futures, Methanol Futures, Glass Futures, Rapeseed Futures and Rapeseed Meal Futures.

The gross trading volume of ZCE reached 495.8254 million contracts in 2010, and trading turnover for the year was RMB 30,895.665 billion Yuan (1 Yuan approximately equals to 0.159 USD). In 2011, the gross trading volume was 406.3907 million contracts, trading turnover was RMB 33,418.515 billion Yuan, and they accounted for about 38.55% and 24.30% of the national gross trading volume and national gross trading turnover of Chinese futures market respectively. In year 2012, the gross trading volume was 347.0282 million contracts and gross trading turnover was RMB 17,363.65 billion Yuan, accounted for about 23.93% and 10.15% of the national gross trading volume and national gross trading turnover of Chinese futures market respectively.

FOCUS: How active are foreign investors in your exchange? How accessible is your market?

ZCE: Currently some foreign investors (mainly business entities) can access ZCE’ market indirectly by trading through their established local branches in China. In technical perspective, ZCE pays great attention to cutting-edge technologies around the globe, sticks to “Technology takes the lead” strategy. ZCE continues to make great efforts to build top level trading platforms, to meet new demands from business innovations. From policy perspective, ZCE needs to follow the progress of reform and opening-up of Chinese capital markets. So far, according to ZCE’s current rules and regulations, foreign investors are not yet allowed to access ZCE’s market directly.

FOCUS: What new project/product are you currently working on?

ZCE: ZCE will further intensify efforts on product R&D in the next 3-5 years. Following measures are taken: Firstly, ZCE plans to launch more agricultural related futures products such as potato, japonica rice, raw silk and carbamide etc; Secondly, ZCE will try to launch some energy futures such as Steam Coal and Natural Gas etc; In addition, ZCE will continue to put more efforts in the R&D of chemical and industrial futures products such as Ethanediol, Short Fiber, Ferroalloy etc; Moreover, ZCE is actively engaging in the preparation of launching future options, but firstly ZCE will launch simulated trading for future options when time is ready; Last but not least, ZCE will further modify and improve its agricultural commodity futures price index, and publish the index when time is ready, on the basis of which, ZCE will conduct research in index futures products.

Apart from those mentioned above, ZCE will also actively engage in explore the methods for linking with regulated domestic spot market, promote the construction of multi-layered futures market system. Furthermore, ZCE will conduct research in how to promote access by qualified foreign firms and methods to allow foreign product brands to take part in delivery procedure.

In order to achieve the aim of “technology supports to business”, on one hand, ZCE continues to improve current trading system, especially in the perfection of core trading system, on the other hand, ZCE is working on R&D of the next generation core trading system, with the hope that the new system can be one of the globally most advanced trading system, which can accommodate the requirements for trading index futures, options etc.

FOCUS: What are the challenges you see in your market today and in the future?

ZCE: The challenges ZCE faces for now and a foreseeable future include the following:

Product R&D: There are less and less high quality product resources by traditional meaning, most of the new, potential futures products require a great deal of innovation on methods of delivery, clearing and risk control. Research needs to be done on how to make these innovations steadily and securely.

Market surveillance: ZCE has already implemented an effective system on surveillance, successfully took precautions against and reduced risks. As ZCE’s speeding up its efforts on products and business innovation, trading gets more complicated at ZCE, therefore ZCE needs to improve its front-line surveillance constantly.

Opening to outside world: The linkage and correlation between ZCE and international markets are not high. Degree of participation by foreign investors and their familiarity towards ZCE’s products, rules and regulations needs to be improved.

As one of the three commodity futures market in China, after 20 years of continued development and progress, ZCE has established its own position and influence in Chinese domestic market.

FOCUS: How do you assess your exchange`s position at a time of increased globalization?

ZCE: The trend of globalization is intensifying, world derivatives market is going through a mass transformation. As one of the three commodity futures market in China, after 20 years of continued development and progress, ZCE has established its own position and influence in Chinese domestic market. In recent years, under the requirement of the CSRC, ZCE actively prepares itself to get ready to compete with other exchanges in world derivatives markets, and ZCE is doing everything necessary for opening to worldwide investors. We believe that when Chinese market is fully integrated into world market, ZCE will have its own place in world derivatives market, and ZCE will become one of the influential international exchanges.