Securities Times：Modifications by SHFE to its Copper, Aluminum and Lead Futures Contract and the Detailed Rules on Delivery

Date：2017-03-21

Contributed by Shen Ning, reporter from Securities Times

Yesterday, SHFE published an announcement on the modifications to its copper, aluminum and lead Futures, and the detailed rules on delivery.

These modifications mainly involved relevant regulations on delivery grade for copper futures, aluminum futures, lead futures and so on. As for copper cathode futures, the pound difference on its standard warrant is adjusted from “ less than ±0.2%” to “ less than ±0.1%”.

According to the Exchange, the pound difference in the contract design by referencen to spot copper trade practices, was ±0.2% back in 1999 when copper cathode futures was listed. Thanks to continuous improvement in the precision of metering equipment over the past few years, metering equipment of upstream enterprises and delivery warhouses is capable for operation with a pound difference of ±0.1% (or even lower) that has already been gradually used in spot transactions.  

At the same time, the voices of downtream enterprises for narrowing the pound difference standard were also strong, for which will greatly reduce their economic losses arising from pound difference. Moreover, the SHFE certified delvery warehouses have already put into practice the ±0.1% standard when weighing aluminum, lead, zinc, tin and nickel products for futures delivery. Therefore, it is nessecessary for the Exchange to modify the current pound difference standard for copper cathode, in a bid to better serve the non-ferrous metals industry. 

Furthermore, SHFE had also modified and perfected the delivery grade for aluminum futures and lead futures.

Relevant head from SHFE said that SHFE has conducted an extensive market research on producers of each product, consumption enterprises, trading enterprises, certified delivery warehouses and relevant Futures-firm members by centering around the modifications to delivery grade for copper, aluminum and lead futures. 

It is widely acknowleged in the industry that new standard lives up to industry and market development trend, without big techincal obstacle on executive level. Meanwhile, following the implemetation of modified contracts and their appendices, the level of standardization and normalization of relevant products for futures delivery is expected to be improved, which will not only further facilicate the market functioning and risk management, but also is beneficcial integration of futures market with spot market. Following the issance of these modifications, there is a grace period left for each product based on its operating futures. The purpose is to ensure that futures delivery runs smoothly and that market participants get a fully underanding of the modified terms.