The Xinhua News Agency: Shanghai Futures Exchange Released Rules and Regulations of Crude Oil Futures

Date: May 12, 2017

Reported by CHEN Yunfu, Journalist of the Xinhua News Agency

After having solicited opinions and repeated discussion for more than one year, the crude oil futures, China’s first global commodities futures open to global investors, has made some further progress. On the night of May 11^th, Shanghai International Energy Exchange, a subsidiary of Shanghai Futures Exchange, officially released INE trading rules and 11 detailed rules and regulations pertaining to the proposed crude oil futures, marking another step taken towards the “Chinese version” futures contract of the No.1 commodities in the international markets.

According to the contract specifications, this proposed crude oil futures uses Medium Sour Crude Oil as its underlying product, with trading unit set at 1000 barrels per contract, listed contracts including monthly contracts for the most recent 12 consecutive months and the following 8 quarterly months, also with a minimum trading margin set as 5% of the contract value.

Crude oil futures is the first CSRC-approved specialized product in mainland China. The fundamental framework for crude oil futures is designed as “international platform, net price trading, bonded delivery and RMB denomination”. Both overseas traders and brokerage firms are able to participate in its trading. With those designed rules and systems, crude oil futures is intended to establish a regulatory system that not only complies with Chinese supervision requirements, but also absorbs the universal international practices.

According to INE, the crude oil futures will be integrated the domestic market with the global market in its trading and money transfers. On the one hand, the financial policy innovations shall be given full play such as cross-border usage of RMB and administration on foreign exchange, and as stipulated, crude oil futures will be denominated in RMB and will accept foreign exchange as its trading margin. On the other hand, international investors will also be provided with convenient direct and indirect accesses to the trading. Meanwhile, the role of INE is made clear as a central clearing counterparty, in order to maintain the market stability.

According to the relevant person in charge of INE, further efforts will be made during the next period to work proactively and prudently in preparing for the contract listing, aiming at an official launch within this year.