Dalian Commodity Exchange: Iron Ore Futures Contract To Be Listed On October 18
Dalian Commodity Exchange released the “Notice on Relevant Matters over Trading of Iron Ore Futures Contract” and the iron ore futures contracts will be listed for trading since October 18, 2013.
According to the Notice, the first contracts to be traded are I1403, I1404, I1405, I1406, I1407, I1408, and I1409. The listed benchmark price of each contract will be further noticed on the trading day before listing.
According to the Notice, the trading margin of the iron ore futures contract is temporarily set as 5% of the contract value during the earlier period of listing, the trading limit of the contract is temporarily set as 4% of the settlement of the previous trading day, and the trading limit of new contracts on the first day of listing is 8% of the listed benchmark price. The trading commission of the contract is 0.008% of traded contract value and the commission for the same position with early opening transaction and late closing transaction on the same day is 0.004% of traded contract value. After the settling of each trading day, DCE will publish the trading volume and position-holding volume of all iron ore futures contracts members on that day.
The Notice specified the designated quality inspection institutions and designated delivery warehouse (factory warehouse) of the iron ore futures. The China Certification and Inspection Group Inspection Co., Ltd., the SGS China, and the Shanghai Intertek Testing Service Co., Ltd. are the designated quality inspection institutions for iron ore. The Tianjin Port Trading Market Co., Ltd., the Jiangsu Lianyungang Port Co., Ltd., the Rizhao Port Co., Ltd., the Qingdao Port (Group) Co., Ltd, the Tangshan Port Logistics Co., Ltd., the Tianjin Gangjun Logistics Development Co., Ltd, and the Caofeidian Port Co., Ltd. are the designated delivery warehouses for iron ore; and the Hebei Iron and Steel Group Mining Co., Ltd, the Jiangsu Shagang International Trade Co., Ltd., and the SINO Steel Corporation are the designated factory warehouses for iron ore. The delivery places of iron ore B/L (bill of lading) are the Jingtang Port, the Caofeidian Port, the Tianjin Port, the Qingdao Port, the Rizhao Port, and the Lianyungang Port.
On the same day, DCE also released the “Iron Ore Futures Contract of DCE” and the amendments to relevant detailed implementation rules. Compared with the exposure draft released before, two major changes have been noticed in the amendments: first, the position limit proportion of ordinary customers and non-brokering members has been changed into 1:1 from the previous 1:2, that is, the position limit of non-futures company members and clients in ordinary months is 20,000 lots, and as of the tenth trading day in the month before the delivery month, the position limit of non-futures company members and clients is 6,000 lots and the limit in delivery month is 2,000 lots; second, it further defines matters over cancellation of receipts and the standard warehouse receipts of iron ore should be cancelled before the last workday in March of each year.
According to the futures contract content released by DCE, the trading unit of iron ore contract is 100 tons per lot, the minimum changing price level is RMB 1 per ton, the trading limit of contract is 4% of the settlement of the previous trading day, the minimum margin is 5% of the contract value, the trading months range from January to December, the last trading day and delivery day are the tenth trading day of the contract month and the third trading day after the last trading day respectively, and the settlement is in the way of physical delivery.
According to the delivery quality standard of iron ore, the standard delivery product of iron ore is 62%-iron-grade ore fines and the ore fines and concentrates above 60%-iron-grade can also be used for delivery. The standard product is designed in accordance with the mainstream bulk iron ore and introduces the microelement index limit.
According to the amendments to trading rules, delivery rules, and settlement rules, the maximum volume of iron ore contract trading order made each time is 1,000 lots and the delivery unit is 10,000 tons. The iron ore positions held by personal customers and the positions that are not integral multiples of non-deliverable unit cannot be delivered, and contracts can be delivered at one time.
Iron ore’s major difference with the previous varieties lies in its delivery through both the standard warehouse receipt and the B/L. The B/L delivery refers to the physical delivery applied by the seller and the buyer, paired and supervised by the exchange institutions, and delivered and cleared according to established procedures within the specified time in the month before the delivery month. The delivery place is chosen among the delivery places designated by DCE and the specific designated delivery place will be further noticed by DCE. The B/L delivery is managed by members for the clients, and non-futures company members can manage it by themselves. The total amount of the B/L delivery application of the clients should not exceed its positions in the same direction. The amount of each B/L delivery application of iron ore contract is 40,000 tons or its integral multiples. The settlement price of B/L delivery is the settlement price on the paring day of the B/L delivery of the futures contract.
According to the amendments to the risk management measures, with regard to the margin system design, DCE will apply gradient charges on the margin of iron ore futures contracts that are close to delivery, that is, since the tenth trading day in the month before the delivery month of the iron ore futures contract, the contract margin will be increased to 10% of the contract value and since the iron ore futures contract’s entering into the delivery month, the contract margin will be increased to 20% of the contract value.
In terms of position-holding management, when the total bilateral position-holding amount in a contract month is less than or equal to 800,000 lots, the margin of each iron ore contract is 5% of the contract value; and when it is above 800,000 lots, the margin is 7%. In terms of position-holding limit, when the position-holding on a single side is less than or equal to 200,000 lots, there is no position-holding limit for futures company members; and when it is above 200,000 lots, the position-holding limit of the contract should be no more than 25% of the single position-holding.
Relevant person of DCE said that to ensure the successful listing and stable operation of the iron ore futures, DCE will actively carry out the multi-level and multi-dimensional market training and investors education according to the plan: first it will cooperate with industry associations and establish continuous industry training plan, so as to comprehensively enhance industry clients’ skill of using futures market to manage risks; second, it will provide business training to member units, so as to increase member units’ service ability on all levels; third, it will cooperate with futures companies, offer skill training and services to its major clients, and extend the scope of “thousands of factories and tens of thousands of enterprises” market service project.