Shanghai Morning Post: Night Trading Session Improves Internationalization of SHFE

Updated on Dec 25,2014

By Han Yizhong

On Friday evening, the night trading products of the Shanghai Futures Exchange (SHFE) were expanded again with the four products of rebar, hot rolled coils, natural rubber and bitumen formally ushering in the era of continuous trading or night trading session.

It is learnt that the opening time for all the four products added by the SHFE to the night trading session is 21:00, consistent with the formerly launched night-trading products; in terms of the closing time, the products of bitumen, rebar and hot rolled coils are at 1:00 am the next day, keeping pace with the products of non-ferrous metals, with the natural rubber closing at 23:00.

An insider said that in the context of economic globalization and trade networking, the interaction between the real economy and the futures and spot markets at home and abroad has been strengthened continuously and the continuous trading has become an inevitable trend for the development of the global futures markets, which is of great significance for the development of related industries and the internationalization of the futures market.

Abundant achievements have been made since the night trading program was introduced a year ago.

The introduction of the continuous trading system is an important measure in recent years for the innovation in the trading system of China’s futures market and marks an important step made by domestic futures market toward the international development.

The SHFE took the lead among domestic exchanges to launch the night trading program for the precious metals on July 5, 2013, with the non-ferrous metal products added to the night trading on December 20 that year. Since the launch of the night trading program, the market has seen smooth operation with the market sizes of relevant products increased significantly, the structure of the investors constantly optimized and the market functions brought into more play.

As of yesterday, the SHFE totaled a trading volume of 3.82 trillion contracts during the night trading sessions in 2014, accounting for 23.25% of the SHFE’s total trading volume in the same period. The trading volumes of gold, silver, copper, aluminum, zinc, and lead in the night trading sessions accounted for 62.94%, 66.72%, 38.47%, 38.60%, 44.31% and 44.38% respectively of the total trading volumes of the products, and the night trading has become an important part in the market for specific products.

It helps the investors’ hedge against the risks from overseas markets.

The products of ferrous metals and energy and chemical industry put into the continuous trading program are the SHFE’s third night-trading products. Li Qiang, director of Xinhu Futures Research Center, said that the introduction of the night trading for the four futures products has not only provided the trading platforms for the investors to avoid overnight risks in positions but also offered the industry clients more flexible choices of hedging.

He pointed out that as the trade of and the import of raw materials for rebar and hot rolled coils are closely related to the global markets, the introduction of the night trading will help the investors timely hedge against the risks of severe price fluctuations in the international markets and improve the price smoothness of the steel futures products.

In terms of the product of bitumen, Quan Feng with Yongan Futures said that the launch of the night trading for the bitumen futures will enhance the real-time correlation with the upstream materials especially the crude oil. Without the night trading in the past, the plunging crude oil prices tend to cause the bitumen futures to open much lower the next day and result in the gaps. The real-time correlation between the bitumen and crude oil prices after the introduction of the night trading program has increased the continuity of the futures prices and will make the bitumen futures market brisker.

Differentiated demands of the spot industries have been met.

With regard to the different continuous trading hours set for different products, officials of various futures companies said to the reporter that the SHFE had extensively solicited opinions and suggestions from the market participants in various forms such as questionnaire survey and forum of members and clients. On the basis of full consideration of the actual demands of the industry clients and in accordance with the conditions of and relevance with the international markets for related products, the trading hours are basically consistent with those of the nonferrous metal products while adequately reflecting the market features and demands of specific products.

For example, the night trading hours for the natural rubber are from 21:00 to 23:00. Yan Xinbing with Orient Futures said that according to the trading practices on the spot market, the price offering for the rubber is usually brisk between 15:00 and 18:00 after the market closing in China with most spot transactions completed in the period, from which till 08:00 when the markets in Japan and Singapore opened, the commodity prices recorded after fluctuating over the night will bring significant impacts on the prices of natural rubber characterized by high financial feature. The introduction of the night trading program will help to smooth the risky volatility. In this regard, Yuan Shangkuan, manager of the futures business with Hainan Rubber Group, said that setting the closing time at 23:00 is in line with the characteristics of the futures product and mitigates the impact of the extended trading hours on the trading habits of the industry clients.