Review on the Continuous Trading Program (II): “Drill Ground” of Futures Market Internationalization

Updated on Jul 02,2014

July 3, 2014

By Zhang Fan

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

As one of the significant innovational programs of the domestic futures market, the Continuous Trading Program, or the Night Trading Session, of the Shanghai Futures Exchange (SHFE) has, since its launch, made remarkable achievements in expanding the market of relevant products and involving the participation of investors. Meanwhile, the overall operation and maintenance capacity and technical support capacity of the domestic futures industry have been augmented. Futures companies, the front line of the market, have made notable progress in risk control measures, operation and maintenance procedures and management systems, etc., enhancing the business capacity of futures brokers and laid a solid foundation for the internationalization of domestic futures market in the next step.

Overall Operation and Maintenance Quality Has been Improved

Since the launch of the Continuous Trading Program, the SHFE has coordinated all types of market participants including a large number of member companies and software suppliers to optimize the processes of transaction, settlement, risk control, technical and emergency management. It has maintained smooth and steady operation of the Continuous Trading Program and brought to a new level the operation and maintenance capacity of the domestic futures market.

It is known that the SHFE has devised perfect management systems, settlement procedures and technical support methods for the Continuous Trading Program, and formulated relevant rules and business procedures. Besides, the SHFE has issued a series of trading, settlement and technical operation and maintenance instructions to futures company members, thus enhancing all-roundly the business capacity of futures companies in the Continuous Trading Program.

What is noticeable is that the Continuous Trading Program needs the prolonged and continual operation of the technical system, thus making tougher demands on its preparation speed and operation efficiency. The SHFE has augmented the technical support capacity, perfected the management system of technical operation and maintenance, and completed the building of a second set of hardware of the trading system. It has set up a overnight co-movement mechanism among relevant members, software suppliers, communications operators, and market distributors, etc., built in an emergency management mechanism for the Continuous Trading Program, published operation and maintenance guidelines and helped member companies reduce the time of settlement and of technical preparation before restarting trading. The Continuous Trading Program has facilitated the all-round enhancement of the technical support capacity of the whole market.

Management Level of Futures Companies Has Been Constantly Rising

The Continuous Trading Program has not only increased the trading volumes of the futures companies, but also propelled the improvement and perfection of technical management, risk control, operation and maintenance process, and other aspects of the companies, thus upgrading the management of futures companies.

“Our company saw in the launch of the Continuous Trading Program a rare opportunity for development,” said Wen Yongxiang, Vice President of Guotai Jun’an Futures to the Futures Daily journalist. As the Continuous Trading Program covers five and a half trading hours, involving trading, risk control, deposit and withdrawal of funds, client services, capital management of the exchange’s seats, information systems and so on, and is practically “a condensed version” of the operation and maintenance of the day market, Guotai Jun’an Futures has strengthened the co-movement and cooperation among different departments, putting the overall business capacity and risk management capacity to great test. These efforts have been rewarded positively by the market. In the past year when the Continuous Trading Program was implemented, Guotai Jun’an Futures raised steadily its scale of agency transaction businesses in the markets of precious metals and nonferrous metals, strengthened investors’ willingness to hold positions and increased the participation of the clients.

It is crucial to guarantee the smooth operation of the Continuous Trading Program. Quite a few futures companies in China have invested in the continuous trading considerable human and material resources, based on the features of this innovated business and the actual conditions of the companies.

“The process of guaranteeing the smooth functioning of the Continuous Trading Program is the process of raising the operation and maintenance levels of the futures companies,” said Wang Zhibin, General Manager of China Merchants Futures to the journalist. China Merchants Futures has gradually optimized the business processes, and established the duty system of day, middle, and night shifts in operation and maintenance. In this system, the senior staff members give instructions to new staff members in the middle shifts and in this way enable new staff members to be on night shift independently. Besides, the number of operators for the opening of the night market has been increased from 2 to 4 people, reducing substantially the preparation time for the opening.

Pei Yingjian, Deputy General Manager of Luzheng Futures, said that the Continuous Trading Program is the inevitable trend in the development of the futures market. He pointed out that Luzheng Futures has especially tided up and optimized the settlement procedures and risk management mechanism in the practices, deployed multiple systems targeted at different types of clients, and improved the efficiency of business operation. Meanwhile, as for the adjustment of margins and commissions and other business sections that involve a lot of work, the company has first completed the standardized set-up through the batch processing of the technology backstage, then adjusted the set-up to meet the individual needs of the clients, and thus has guaranteed that relevant businesses have been conducted smoothly since the launch of the Continuous Trading Program.

The Road Has been Paved for the Internationalization of Futures Market

The year since the Continuous Trading Program was launch happens to be the historical period when China’s futures market sped up its opening-up to the outside world. The success the Continuous Trading Program has reaped has enhanced the confidence of the market participants in the realization of the round-the-clock, global trading of the domestic futures market in the future.

“The mode of the Continuous Trading Program has provided a golden opportunity for futures market to feel the rhythm of the international market,” said Hu Yuyue, Head of the Securities and Futures Research Institute of Beijing Technology and Business University. He said that one important innovational business of futures companies in the future would be overseas representation, which demands that futures companies know and master the transaction modes and business features of the overseas markets. By participating in the Continuous Trading Program, futures companies have tested their management ideas, risk control mechanism and technical operation and maintenance, accumulating experiences for the future businesses of overseas representation.

Xu Ling, General Manager of Haitong Futures, believed that internationalization is one important theme in the development of China’s futures market and that the Continuous Trading Program launched by the SHFE is an excellent “drill ground’ for it. After a year of business operation, Haitong Futures has carried out systematic tiding up and improvement in IT construction, employer cultivation, risk control, logistics support and other aspects, accumulating experiences for the 7/24 trading and the internationalization of the company in the future as well as toughening up the team.

Zhang Jinrong, General Manager of Guohai Liangshi Futures also said that, Guohai Liangshi Futures has accumulated a lot of experiences in the past year of operation and maintenance. It has improved its management, and will continue to optimize and upgrade the technical systems, increase business staff members in order to meet the challenge of internationalization.

Source: Futures Daily