Shanghai Securities News: Crude oil Futures First Across-the-Market Testing in Production Environment Expected to Start this Week

Date: June 13th, 2017

In order to smoothly launch the crude oil futures, Shanghai International Energy Exchange (“the INE”), a subsidiary of Shanghai Futures Exchange, recently issued a notice on its first across-the-market testing in production environment between June 17^th and June 18^th.

According to the INE, such across-the-market testing in production environment is the exercise that the INE conducts through the technological end to simulate trading, clearing and regulatory reporting scenarios the day before the listing of crude oil futures and the day of the listing of crude oil futures in the production environment after the relevant mock test runs for a period of time.

From a professional view, the preparatory work for crude oil futures consists of three elements, namely the rules, the members and the mock tests. The listing of crude oil futures will be in sight since the mock test was launched on May 31^st.

According to the notice, prior to the listing of crude oil futures, the INE is planning to conduct 4 across-the-market tests in production environment between June 17^th and June 18^th, June 24^th and June 25^th, July 1^st and July 2^nd, and July 8^th and July 9^th.

Sources say, SHFE’s assistance is what INE needs to jointly complete this testing, mainly to verify whether trading, clearing, market data distribution and other concerning business of SHFE can run normally during the listing of crude oil futures.

This testing simulates business scenario the day before the listing of crude oil futures and the day of the listing of crude oil futures respectively. During the testing, the Member Service System is intended for testing purpose only, not for providing production data service.

Besides, according to the INE, all software vendors will probably provide updates for relevant systems soon to support the crude oil futures. Members shall separately fill out the Seat Testing Fact Sheet of Shanghai International Energy Exchange after the completion of the testing. All members shall make sure that their trading seats pass 2 tests at least prior to the listing of crude oil futures.

From this June, the INE’s pace in its preparatory work for crude oil futures has obviously sped up. On June, 5^th, the INE announced the list of the second batch of futures firms honored with the membership, including 46 futures firms who made the cut to be added on the list. With the first batch of 92 futures firms, there are totally 138 futures firms granted with the membership of the INE.

On June 9^th, the INE released the Operation Guidance on Futures Trader Suitability System of Shanghai International Energy Exchange (Tentative) to the Members in a bid to further define the operational requirements of the INE’s investor suitability system. All account opening institutions shall implement the requirements of the INE’s investor suitability system in accordance with this Guidance.

In accordance with the overall schedule for the listing of crude oil futures, the INE will formally receive the applications from the clients for trading code from June 13^th, SHFE said in an announcement released at the night of June 12^th, 2017.

According to an informed source, our journalist learned that all market participants are now waiting for China Futures Association to promulgate such rules as the Guidelines for Supplementary Agreement of Futures Brokerage Contract for the Trading of Domestic Specific Futures Products by Overseas Traders. Once these guidelines are released, the futures firms may formally accept the account opening applications from crude oil futures investors.

In addition, the INE, together with Futures Industry Associations across the country, plan to start a crude oil futures related business training tour in Shanghai, Hangzhou, Beijing, Nanjing, Chongqing and Shenzhen respectively from June 13^th, 2017 in a bid to help relevant persons of the futures firms understand the significance of the listing of crude oil futures to China’s energy reserve and economic development and the important role of crude oil futures in serving the real economy and promoting the implementation of “Belt & Road Initiative”, as well as help them master business rules and operating procedures regarding the trading, delivery, settlement and risk management of crude oil futures.

Previously, according to relevant sources from the INE, the Exchange will carry on the preparatory work for the listing of crude oil futures. The INE aims at launching the contract within this year, after getting all the preparatory work done in a proactive and prudent manner.