Review on the Continuous Trading Program (IV): Settlement Efficiency of Futures Market Improved

Updated on Jul 07,2014

July 7, 2014

By Zhang Fan

Special Report IV to Mark the 1st Anniversary of the Continuous Trading Program of the SHFE

Since the launch of the Continuous Trading Program, or the Night Trading Session, by the Shanghai Futures Exchange (SHFE), the market has been operating steadily, and as an important link in the Continuous Trading Program, settlement has been conducted smoothly, thanks to the concerted efforts of the exchange, the futures margin depository banks and the futures companies. In the year since the the Continuous Trading Program was launched, the five major margin depository banks of the SHFE have made full use of their expertise in serving the futures industry, and provided powerful support for settlement in the Continuous Trading Program.

As is understood, before the launch of the Continuous Trading Program, the SHFE had already innovated and perfected all links in the settlement business of the whole market, established a set of settlement modes that could be adjusted to the operational environment of the Continuous Trading Program. By the concerted efforts of all the parties in settlement, the level of settlement as a whole has been elevated.

“The trading hours of the night market are beyond the business hours of general bank businesses, but the demand on timeliness and security of capital transfer remains the same,” said He Yan, head of the institutional business department of Shanghai Branch of Construction Bank of China (CBC), commenting on the challenges that the Continuous Trading Program has brought to the banking system.

According to his introduction, in order to guarantee the smooth operation of settlement, capital transfer and other sections in the Continuous Trading Program, the head office of CBC and its Shanghai Branch already started active preparation in its institutional business, technology, operation and other departments when the SHFE planned to launch the Continuous Trading Program at the beginning of the year 2013. They upgraded the existing bank-to-futures transfer system and the BECK system, which were successfully launched after completing testing. Besides, CBC also optimized the internal business processes, formulated emergency management plans and opened 24 hour service hot lines especially for futures companies.

Similarly, to accommodate the successful launch of the Continuous Trading Program, the head office of Agricultural Bank of China (ABC) arranged for the institutional department, information technology department, e-bank and other departments to coordinate with its Shanghai Branch, and transformed and upgraded the bank-to-futures transfer system, the BECK system, the on-line banking emergency management system, and the data report system, etc.

“In the first days after the Continuous Trading Program was launched, the core systems of ABC were unable to support 7/24 transfer to business settlement accounts, and might incur the risk of errors,” a relevant official of the Interbank Department of the Shanghai Branch of ABC pointed out that to provide full support for the Continuous Trading Program and safeguard the interests of investors, ABC devised special emergency management plans for the Continuous Trading Program. More than three months after the launch of the Continuous Trading Program, the new generation of the core systems of ABC were introduced and realized 7/24 seamless operation. The official said, “For one year, the systems of ABC have been running steadily and no single risk event has ever occurred.”

As is introduced, in the past year since the Continuous Trading Program was launched, the various systems of the Industrial and Commercial Bank of China (ICBC) have been operating smoothly and no major risk events have ever occurred either.

While providing highly efficient settlement services for the Continuous Trading Program, the banks also took great initiative in promoting the launch of bank-to-futures transfer systems for the Continuous Trading Program. They have realized the 7/24 operation of the systems, enhanced effectively the capacity and level of depository banks in serving the investors of the futures market, removed the obstacles in settlement efficiency for other exchanges and other products to engage in the Continuous Trading Program, and thus laid a solid foundation for the expansion of the Continuous Trading Program.

He Yan said that after one year of operation, CBC has accumulated precious experiences in the Continuous Trading Program. It can now allow daytime trading to complete bank-to-futures reconciliation files before 16:00, and the night trading to sign in again from 18:00, before the end of the Continuous Trading Program. He Yan said, “Continuous trading is the inevitable trend in the development of the futures market, and CBC is now sufficiently prepared for its upgrade and expansion.”

Source: Futures Daily