WFE Interviews with the Dalian Commodity Exchange
FOCUS : Could you give us a bit of background about your exchange ?
DALIAN COMMODITY EXCHANGE : Established on February 28, 1993, Dalian Commodity Exchange (DCE) is one of the four Chinese mainland futures exchanges approved by the State Council. Presently, it has listed 9 futures products spanning the agricultural, chemical and mineral resources sectors, including corn, No. 1 soybean, No. 2 soybean, soybean meal, soybean oil, palm oil, LLDPE, PVC and Coke.
With its 633 million contracts of futures trading and RMB33.32 trillion (round-trip) of trade turnover in 2012, accounting for 43.67% and 19.55% of the total market share on China’s Mainland, a year-on-year increase of 119.01% and 97.45% respectively, DCE ranks the 1st in futures trading among its counterparts on China’s Mainland.
FOCUS : How active are foreign investors in your exchange ? How accessible is your market ?
DALIAN COMMODITY EXCHANGE : Joint-ventures and whole owned foreign enterprises located in Chinese mainland are eligible to conduct trades on DCE’s futures market. In 2012, over 200 enterprises with overseas background participated in Dalian’s futures markets, accounting for 4% of DCE’s corporate clients, with their positions of soybean meal and soybean oil accounting for about 20% of DCE positions. Now, of all DCE’s members, five have a background of foreign investment, among which 3 are futures brokerage companies and 2 others are trading members. The global top four grain merchants and famous grain and oil enterprises including Yihai Kerry, Noble Group and Toepfer are among DCE’s active members and clients.
At present, prospective investors for DCE’s trading are required to use the local area network, special line and the “four connected networks” (the networks of DCE, Shanghai Futures Exchange, Zhengzhou Commodity Exchange and China Financial Futures Exchange are connected through a special line). DCE’s information system has experienced 6 generations of upgrading. DCE’s 6th generation of information system launched on January 29, 2007 supports emerging forms of business including order of a variety of types, options and arbitrages.
FOCUS : What new project/product are you currently working on ?
DALIAN COMMODITY EXCHANGE : DCE is going all out to accelerate the innovation on listed varieties and trading tools, develop OTC business, promote the construction of multi-level commodity market system, transform the DCE into a institution with corporate system in the direction of marketization, improve the system and mechanism of marketization, enhance market efficiency and do relevant research and preparation work according to the planned steps for opening Chinese mainland market to the outside world.
In terms of product development, DCE has rounded off the preparation for the listing coking coal and egg futures, while the project of developing iron ore and wood-fiber board futures products have been filed with CSRC. Besides, the development of other products including meat chicken is under research. Research and development as well as listing preparation for these products have laid a solid foundation for the innovative development of Dalian’s futures market in 2013. When these products are launched to the market, a system of 6 product suites including grain, oil, plastic and chemical products, minerals, livestock products and timber products will come into being in DCE.
FOCUS : What are the challenges you see in your market today and in the future?
DALIAN COMMODITY EXCHANGE : At present, with China’s regulators of the futures market holding the regulation concept of “tightening regulation while easing control”, Chinese futures market is speeding up its reform for marketization. As a result, DCE is facing structure conversion as well as restructuring and improvement of the listing mechanism, which will bring new opportunities for market development along with new pressure from market competition. Confronted with these new challenges, DCE should miss no possible opportunities to speed up its innovative development for a winning position in market competition. On the one hand, in the rapid development of China’s economy, its industrialization, informatization, urbanization and modernization of its agricultural modernization processes are being actively promoted and marketization and internationalization are still deepening. On the other hand, the development level of the exchange traded derivatives market fails to meet the needs of the development of the real economy, with still much to be improved in terms of market services. Besides, the development of the exchange traded derivatives market is beginning to face the pressure from both the OTC market and the pressure resulted from the global competition.
In recent years, a number of global futures exchanges have begun to transform themselves into institutions with corporate systems or, by means of promoting e-trading and cross-regional merger, enlarging their market coverage region and services field. All this aims to adapt to the integration and globalization of the economic development and enhance the market competition. Compared with some mature futures market, DCE and other Chinese mainland exchanges have still a long way to go in terms of trading varieties, structures, trading scale, influence, investors’ structure and other aspects. Therefore, in their future market development, Chinese mainland exchanges need to accelerate their innovative development and adapt themselves to the trends on the global market, in a bid to seek breakthroughs and changes to further develop themselves.
FOCUS : How do you assess your exchange`s position at a time of increased globalization ?
DALIAN COMMODITY EXCHANGE : DCE has gained a higher position thanks to its steady enlargement of market scale in recent years. After two decades’ constant efforts, DCE has become one of the three most prominent agricultural futures exchange markets and the largest of its kind in the plastic products futures market in the world. With the launch of the world’s first coke futures, DCE has turned into a comprehensive futures market. The first half of 2012 saw DCE standing in the 12th place on the trading volume ranking chart of all the major derivatives exchanges in the world conducted by the Futures Industry Association,. Futures’ prices in Dalian have become the main data basis for many overseas institutional investors in their analysis of the relationship between demand and supply in the global market as well as the window for the information of China’s economic development and the relationship between demand and supply of relevant commodities. By the end of the last year, up to 20 foreign exchanges had established cooperative relationships with DCE.
Despite the growing scale and influence over the years, DCE is in its preliminary stage for overall market development, facing the key stage of improvement with its emphasis on quantity transferred to that on quality. Comparatively limited varieties and investors’ structure mainly consisting of domestic investors constrained the enhancement of the market development level. As a result, DCE has still much to do to achieve the level of the global market. In its market development and steady open-up promotion in the future, DCE will improve its level of market development and global competitiveness by innovation of its varieties, technology, services as well as systems and mechanisms.