Futures Daily: Shanghai Futures Exchange: The R&D of Copper and Gold Options Have Been Basically Ready

Updated on: December 5, 2016

Reported by Xu Qian, Journalist from Futures Daily

On December 4, the “Innovative Development Service Real Economy Sub-forum” jointly sponsored by Shanghai Futures Exchange (SHFE) and Shanghai Futures and Derivative Research Institute was held in Shenzhen. In the conference, Zhang Min, the Senior Manager of the Derivative Department in SHFE expressed that, the spot foundation of copper futures is good, and currently, the listing preparation R&D work of copper options, including the gold options varieties have been basically ready, and the plan was to carry out option simulation transaction or entire market network test at an appropriate time.

Zhang Min expressed that, currently, SHFE had confirmed that the options variety was European option, i.e., T = the last trading date. On the basis of referring to the successful experience of the domestic and foreign exchanges, and as per the development characteristics of Chinese futures market, SHFE has designed the option margin charging method, to effectively cover the market risks under daily and extreme conditions. Its methods including: The buyer has no need to pay the margin; Adopt delta method to convert it to future position for unified calculation; the option premium is locked as the margin, to prevent the cashing out through selling options; Set the minimum margin of options.

She disclosed that, the market making regulations and systems of relevant options varieties have been basically perfected, and the Market Making Management Methods covering “market making qualification and approval, obligations, rights and risk management” have been confirmed. This year, SHFE has also perfected the market making business guidance documents, and currently, it is under the phase of seeking for opinions; in the future, some details will be perfected.

“SHFE is now studying other protection measures of options varieties, including the erroneous trade protection mechanism, one-key erroneous trade, automatic erroneous trade, and the setup of field traders” said by Zhang Min.

Jiang Xiaoquan, the Director Assistant for the First Department of Commodity in SHFE expresses that, from January to September, 2016, the total trading volume for the futures of nonferrous metals reached to 216 million lots (unilateral), which was increased by 70.5% on a year-on-year basis, the trading amount was RMB 21.91 trillion, which was increased by 21.4% on a year-on-year basis. Throughout the six big varieties, except the copper futures, the future trading volume for other nonferrous metals presents a sharp increase trend based on a year-on-year basis.

Jiang Xiaoquan expresses that, as can be seen from the nonferrous metals, since the night trading hours were opened in 2013, the domestic price smoothness has been obviously increased, and enterprises can timely hedge against any risks at each night trading hour per day, to effectively avoid the extreme condition of trading halt during the opening of next day.