ARBITRAGE TRADING RULES OF THE SHANGHAI FUTURES EXCHANGE

(Revised Version) 

 

CHAPTER 1 GENERAL PROVISIONS

Article 1 These Arbitrage Trading Rules are made in accordance with the General Exchange Rules of the Shanghai Futures Exchange and other applicable rules to regulate arbitrage trading and promote the sound development of the futures market.

Article 2 Arbitrage trading and speculative trading are referred to collectively as non-hedging trading. Non-hedging positions shall be subject to the percentage-based and fixed-amount position limits as prescribed in the Risk Management Rules of the Shanghai Futures Exchange for each futures contract in different periods of trading. A non-futures firm Member (“Non-FF Member”) or Client may apply for an arbitrage quota to hold more non-hedging positions.

Article 3 For the purpose of these Arbitrage Trading Rules, arbitrage trading is classified into calendar arbitrage and cross-product arbitrage. “Calendar arbitrage” means trading different contracts on the same product for profit; “cross-product arbitrage” means trading contracts on different products for profit.

The product mix for cross-product arbitrage will be separately announced by the Shanghai Futures Exchange (the “Exchange”).

Article 4 Arbitrage positions include arbitrage positions for regular months and arbitrage positions for nearby delivery months.

The division of regular and nearby delivery months as well as the application timelines for arbitrage positions during these different months shall be governed by the rules for the particular futures products.

Article 5 Members and Clients that engage in arbitrage trading shall observe these Arbitrage Trading Rules.

CHAPTER 2 APPLICATION AND APPROVAL OF REGULAR MONTH ARBITRAGE QUOTA

Article 6 A Client that needs an arbitrage quota shall apply to any of its carrying FF Members, which shall, after reviewing the application, complete the application procedures with the Exchange pursuant to these Arbitrage Trading Rules. A Non-FF Member shall complete the procedures directly with the Exchange.

Article 7 A Non-FF Member or Client applying for a regular month arbitrage quota of certain products shall submit the following materials to the Exchange:

(i) an Application (Approval) Form for Regular Month Arbitrage Quota of the Shanghai Futures Exchange;

(ii) arbitrage strategies (such as source of funds, size of positions, and classification as calendar arbitrage or cross-product arbitrage); and

(iii) other materials required by the Exchange.

A regular month arbitrage quota of a product will remain valid for the product after being granted.

Article 8 A Non-FF Member or Client applying for a nearby delivery month arbitrage quota of certain contracts shall submit the following materials to the Exchange:

(i) an Application (Approval) Form for Nearby Delivery Month Arbitrage Quota of the Shanghai Futures Exchange;

(ii) arbitrage strategies (such as source of funds, size of positions, classification as calendar arbitrage or cross-product arbitrage, arrangements for position opening and reduction, and intention of delivery);

(iii) an analysis of the spread divergence of the contract; and

(iv) other materials required by the Exchange.

Article 9 The Exchange will determine the regular month arbitrage quota of an applicant based on, among others, its credit standing, past transactions, and usage of existing arbitrage quotas. The regular month arbitrage quota shall not exceed the quantity specified in the supporting materials.

Article 10 The Exchange will determine the nearby delivery month arbitrage quota of an applicant based on, among others, its credit standing, past transactions, positions in relevant contracts, quantity of deliverable commodities, and whether the contracts’ spread diverges from the normal spread. The nearby delivery month arbitrage quota shall not exceed the quantity specified in the supporting materials.

CHAPTER 3 ARBITRAGE TRADING

Article 11 Aggregate non-hedging positions held by a Client at different FF Members shall not exceed the percentage-based position limit or fixed-amount position limit for the contracts concerned in different periods of trading plus the arbitrage quota for the same period.

Long non-hedging positions are the aggregate of long positions in futures and call options and short positions in put options; short non-hedging positions are the aggregate of short positions in futures and call options and long positions in put options.

CHAPTER 4 REGULATION

Article 12 The Exchange will review an application for arbitrage quota within five (5) trading days of receiving the application.

Article 13 A Non-FF Member or Client that needs to adjust its hedging quota shall timely apply to the Exchange.

Article 14 The Exchange regulates the usage of the arbitrage quotas granted to Non-FF Members or Clients and may adjust such quotas based on market conditions.

Article 15 A Non-FF Member or Client, during the validity period of its arbitrage quota, shall timely notify the Exchange of any material change to its business. The Exchange has the right to adjust the arbitrage quota based on the new circumstances.

Article 16 If the aggregate non-hedging positions held by a Non-FF Member or Client exceed the percentage-based position limit or fixed-amount position limit for the contracts concerned in different periods of trading plus the arbitrage quota for the same period, then the Non-FF Member or Client shall adjust its positions by the end of the first trading session on the following trading day. If the adjustment is not made before the deadline or fails to eliminate the excess, the Exchange may exercise forced position liquidation.

Article 17 If a Non-FF Member or Client engages in fraud or otherwise breaches any laws, regulations, or rules of the Exchange when applying for or using an arbitrage quota, the Exchange may deny its application, adjust or cancel its arbitrage quota, take such measures as suspending the opening of new positions, requiring the close-out of positions within a specified time period, or exercising forced position liquidation if necessary, and handle the case according to the Enforcement Rules of the Shanghai Futures Exchange.

Article 18 If a Non-FF Member or Client uses its approved arbitrage quota to influence or attempt to influence market price, the Exchange may take such measures as giving a verbal reminder or written warning, adjusting or canceling the hedging quota, and suspending the opening of new positions, requiring the close-out of positions within a specified time period, or exercising forced position liquidation if necessary, and handling the case according to the Enforcement Rules of the Shanghai Futures Exchange.

Article 19 The Exchange may prescribe the collection of trading margin or transaction fees of arbitrage trading.

CHAPTER 5 MISCELLANEOUS

Article 20  To the extent of any inconsistency between these Arbitrage Trading Rules and the rules for the particular futures products, the product rules shall prevail.

Article 21 The non-hedging positions shall be reduced and shall be adjusted to multiples of a certain number of lots in the nearby delivery months according to the provisions of the Risk Management Rules of the Shanghai Futures Exchange on reducing and adjusting speculative positions.

Article 22 The Exchange reserves the right to interpret these Arbitrage Trading Rules.

Article 23 These Arbitrage Trading Rules take effect on October 23, 2024.