HOT-ROLLED COIL FUTURES RULES OF THE SHANGHAI FUTURES EXCHANGE

CHAPTER 1 GENERAL PROVISIONS

Article 1 These Hot-Rolled Coil Futures Rules are made in accordance with the General Exchange Rules of the Shanghai Futures Exchange, the SHFE Hot-Rolled Coil Futures Contract Specifications, and the relevant business rules to regulate business related to hot-rolled coil futures at the Shanghai Futures Exchange (the “Exchange”).

Article 2 These Hot-Rolled Coil Futures Rules shall be observed by the Exchange, Members, Clients, Delivery Storage Facilities, Designated Inspection Agencies, Futures Margin Depository Institutions, and other participants of the futures market.

CHAPTER 2 TRADING

Article 3 Contract size for hot-rolled coil futures is ten (10) metric tons per lot.

Article 4 Price quotation of a hot-rolled coil futures contract is Yuan (RMB)/metric ton.

Article 5 Minimum price fluctuation of a hot-rolled coil futures contract is one (1) Yuan/metric ton.

Article 6 Listed contracts of hot-rolled coil futures cover the most recent twelve (12) months.

Article 7 Trading hours of a hot-rolled coil futures contract are 9:00 a.m. to 11:30 a.m., 1:30 p.m. to 3:00 p.m., and other hours specified by the Exchange.

Article 8 The last trading day of a hot-rolled coil futures contract is the 15th day of the contract month. The last trading day will be postponed accordingly if it is a legal holiday in China, and will be subject to separate adjustment and announcement by the Exchange if it falls in the Spring Festival month or any other month specially designated by the Exchange.

Article 9 Contract symbol of hot-rolled coil futures is HC.

Article 10 For the hedging and arbitrage quotas of a hot-rolled coil futures contract, regular months extend from the day of listing to the last trading day of the second month before the delivery month, while nearby delivery months cover the month before the delivery month and the delivery month.

Article 11 An application for a regular month hedging quota of a hot-rolled coil futures contract shall be submitted by the last trading day of the second month before the delivery month of the contract. Late applications will not be accepted by the Exchange.

An application for a nearby delivery month hedging quota of a hot-rolled coil futures contract shall be submitted between the first trading day of the third month before the delivery month of the contract and the last trading day of the month before the delivery month. Late applications will not be accepted by the Exchange. An application for a nearby delivery month arbitrage quota of a hot-rolled coil futures contract shall be submitted between the first trading day of the second month before the delivery month of the contract and the last trading day of the month before the delivery month. Late applications will not be accepted by the Exchange.

Article 12 Hedging quota of a hot-rolled coil futures contract shall no longer be used in a revolving manner starting from the first trading day of the delivery month.

CHAPTER 3 DELIVERY

SECTION 1 GENERAL PROVISIONS

Article 13 A hot-rolled coil futures contract may be physically delivered through an Exchange of Futures for Physicals (“EFP”), a delivery warehouse, or a delivery factory.

Hot-rolled coil futures adopt duty-paid delivery.

Article 14 Grade and quality specifications are provided in the SHFE Hot-Rolled Coil Futures Contract Specifications.

Article 15 Quality specifications

The deliverable hot-rolled coils shall be registered commodities from a manufacturer registered with the Exchange.

The shape, dimension, weight, and tolerance of deliverable hot-rolled coils shall conform to the specifications of GB/T 3274-2017: Hot-Rolled Plates and Strips of Carbon Structural Steel and Low-Alloy Structural Steel or JIS G 3101-2015: Rolled Steel for General Structures.

Article 16 Specifications

Hot-Rolled coils underlying each standard warrant shall consist of commodity of the same manufacturer, grade (designation), width, and thickness.

Article 17 Packaging

The packaging, mark, and certificate of quality of deliverable hot-rolled coils shall conform to the specifications of GB/T 3274-2017: Hot-Rolled Plates and Strips of Carbon Structural Steel or Low-Alloy Structural Steel or JIS G 3101-2015: Rolled Steel for General Structures and other relevant rules.

Article 18 Required documentation for deliverable commodities

The certificate of quality issued by the registered manufacturer shall be provided.

Article 19 Measuring and tolerance

The deliverable hot-rolled coils shall be measured by actual weight. Difference between standard warrant weight and actual delivery weight shall not exceed plus or minus five percent (±5%). Pound difference shall not exceed plus or minus three-tenths of one percent (±0.3%).

Article 20 Delivery unit of a hot-rolled coil futures contract is three hundred (300) metric tons.

Article 21 Delivery period of a hot-rolled coil futures contract is the two (2) consecutive business days immediately following the last trading day of the contract.

Article 22 The benchmark price for delivery settlement of a hot-rolled coil futures contract is its settlement price on the last trading day.

Article 23 Delivery venue: the delivery warehouses and delivery factories of the Exchange, to be separately announced by the Exchange.

Article 24 If standard warrants are used for an EFP and the EFP is settled via the Exchange, and a dispute over the quality of the deliverable commodities arises, the buyer shall submit a request for dispute resolution within twenty-five (25) days after the payment and the exchange of standard warrants, together with the quality assay report issued by a Designated Inspection Agency.

SECTION 2 WAREHOUSE DELIVERY

Article 25 The validity period of each delivery set shall be three hundred and sixty (360) days after the date of production. The earliest date of production of hot-rolled coils underlying each warehouse standard warrant shall be taken as the date of production on the standard warrant.

Article 26 Deliverable hot-rolled coils underlying each warehouse standard warrant shall be stacked together.

Article 27 After the physical delivery is completed, if the buyer has any dispute over the quality or quantity of the commodity (any hot-rolled coil in dispute shall remain in the delivery warehouse), the buyer shall submit a written request to the Exchange for dispute resolution before the fifteenth (15) day (including that day) of the month following the delivery month (in case that day falls on a public holiday, the date shall be extended to the first business day after the holiday), together with the quality assay report issued by a Designated Inspection Agency. The validity period for each batch of the delivered hot-rolled coil shall cover the last delivery day of that delivery. Even if the validity period expires before the final date for the submission of a request for dispute resolution, the seller shall be responsible for the delivered commodities in the event that they fail the quality assay.

SECTION 3 FACTORY DELIVERY

Article 28 Application

Before issuing any factory standard warrants, a Factory shall submit an issuance notice to the Exchange, specifying such information as the product, grade (designation), trademark, name of the carrying Member, name of the owner, and the quantity of standard warrants to be issued.

Article 29 Validity period for the delivery of factory standard warrants

The validity period for the delivery of hot-rolled coil factory standard warrants shall be six (6) months from the date of creation of such warrant.

Article 30 Application for taking delivery

(i) An owner who intends to take delivery shall submit an application through the Standard Warrant Management System to the intended Factory before the seventh (7) business day before the proposed take-delivery date. The application shall specify such information as the specifications and quantity of the commodity, the proposed take-delivery date, method, and plan (including daily quantity), as well as the identification certificate and telephone number of the delivery taker.

(ii) The Factory will confirm the owner’s application within three (3) business days of receiving it after considering the owner’s proposed take-delivery date, specifications of the commodity, and corresponding manufacturer’s production plan, etc.

If the owner’s proposed take-delivery date coincides with that of other owners holding factory standard warrants and their total daily take-delivery quantity exceeds the daily shipment quantity of the Factory, the Factory may make an overall arrangement for shipment considering the order of submission of applications by owners, their take-delivery plans, and production plans, and within three (3) business days after the owner’s submission of application, provide the owner with a take-delivery time period to choose from and a corresponding shipment plan (including daily shipment quantity). If agreeing to the arrangement, the owner may choose one (1) day from the said period as the take-delivery date and confirm the shipment plan; otherwise, the owner shall negotiate with the Factory again to reach an agreement on the take-delivery date and the shipment plan.

(iii) The Factory shall be exempt from any financial liability for any owner’s delay in taking delivery due to the take-deliveries made by multiple owners as described in the above sub-paragraph, provided that the Factory shall timely report such delay and its causes to the Exchange for written record.

Article 31 Production date

The production date of load-out commodity shall be within forty-five (45) days before the take-delivery date agreed between the owner and the Factory.

Article 32 The weight of load-out commodity shall be inspected by the Factory.

Article 33 An owner shall take delivery at the Factory on the agreed take-delivery date according to the shipment plan. If the owner misses the agreed take-delivery date but takes delivery within fifteen (15) days (including the 15th day) thereafter or if the owner fails to take delivery according to the agreed daily take-delivery plan due to any reasons not attributable to the Factory, then the Factory shall still assume responsibility for commodity quality in accordance with relevant futures standards, and make an overall shipment plan based on the take-delivery quantities of all owners until all corresponding commodities are shipped. The owner shall pay an overdue fine to the Factory.

Overdue fine = 2 yuan/metric ton per day × quantity of commodity that should have been taken × number of days overdue

Any shipment delay caused by the owner shall be resolved by both parties through a separate agreement.

Article 34 If an owner fails to take delivery at the Factory within fifteen (15) days (including the 15th day) after the agreed take-delivery date, which leads to the cancellation of its factory standard warrants, then the owner shall pay an overdue fine to the Factory, and the underlying commodities shall be converted into physical products, of which details for taking delivery shall be agreed upon by the parties through negotiation.

Overdue fine = 35 yuan/metric ton × quantity of commodity that should have been taken

Article 35 If an owner takes delivery on the agreed take-delivery date at the Factory, but the Factory fails to ship the commodity according to the agreed shipment plan but still completes the shipment within fifteen (15) days (including the 15th day) after the agreed take-delivery date, then the Factory shall pay compensation to the owner.

Compensation = 50 yuan/metric ton × quantity of commodity that should have been shipped according to the daily shipment plan

Article 36 If the Factory fails to complete the shipment within fifteen (15) days (including the 15th day) after the agreed take-delivery date, the owner may choose either of the followings:

(i) On the 15th day after the agreed take-delivery date, the owner may notify the Factory that it will cease accepting any commodity that should have been shipped from the 16th day after the agreed take-delivery date, and the Factory shall refund the corresponding commodity payment and pay additional compensation to the owner.

Refunded commodity payment and additional compensation = compensation settlement price × quantity of commodity that should have been shipped × 130%

The compensation settlement price is the settlement price of the corresponding nearest month futures contract of the Exchange on the trading day preceding the 16th day after the agreed take-delivery date.

(ii) If on the 15th day after the agreed take-delivery date, the owner fails to notify the Factory that it will cease accepting any commodity that should have been shipped, the parties shall negotiate the details on taking delivery of such commodity.

Article 37 If a Factory commits any default described in Article 35 or 36, it shall pay compensation directly to the owner. If the Factory fails to make the payment in full or in part, the Exchange shall pay any deficient amount to the owner:

(i) with the guarantees provided by the Factory; or

(ii) with the Exchange’s funds and recourse to the Factory by such means as legal proceedings.

Article 38 If an owner commits any default described in Article 33 or 34, it shall pay compensation directly to the Factory. If the owner fails to make the payment in full or in part, the Factory may recourse to the owner by such means as legal proceedings.

Article 39 Any losses incurred to either a Factory or an owner due to any event described in Article 33, 34, 35 or 36 shall be handled by both parties as agreed if they have reached a separate agreement. The agreement shall be filed in writing with the Exchange for record.

Article 40 Quality dispute resolution

An owner who disputes the quality of any delivered commodity shall submit to the Exchange a written objection, accompanied by the quality inspection results issued by a Designated Inspection Agency, within twenty (20) business days following the physical delivery; failing which, the owner shall be deemed to have no objection over the delivered commodity and the Exchange will no longer handle any objection regarding any commodity thus delivered.

CHAPTER 4 RISK MANAGEMENT

Article 41 The minimum trading margin for a hot-rolled coil futures contract is 4%.

Article 42 The stage-based trading margin rates for hot-rolled coil futures are as follows:

Stage of Trading	Trading Margin
As of listing	4%
As of the first trading day of the month prior to the delivery month	10%
As of the first trading day of the delivery month	15%
As of the second trading day prior to the last trading day	20%

 

Article 43 The range of price limit for a hot-rolled coil futures contract is within ±3% of its settlement price of the preceding trading day.

Article 44 Percentage-based Position Limit and fixed-amount Position Limit for each hot-rolled coil futures contract at different stages of trading for an FF Member, a non-FF Member and a Client are as follows (in lots):

	From the date of listing to the delivery month		From the date of listing to the last trading day of the second month prior to the delivery month			First month prior to the delivery month		Delivery month
	Total open interest	Percentage-based position limit (%)	Total open interest	Percentage-based position limit (%) and fixed-amount position limit (in lots)		Fixed-amount position limit (in lots)		Fixed-amount position limit (in lots)
		FF Member		Non-FF Member	Client	Non-FF Member	Client	Non-FF Member	Client
hot-rolled coil	≥1,200,000	25	≥1,200,000	10	10	9,000	9,000	1,800	1,800
			＜1,200,000	120,000	120,000

Note: total open interest and the fixed-amount position limit are based on long or short positions; Percentage-based position limit for the FF Member is the baseline limit.

Article 45 For contracts in hot-rolled coil futures, by the close of the last trading day of the month prior to the delivery month, each Member or each Client shall adjust their speculative positions held through the Member, to multiples of thirty (30) lots and a one-day delay is allowed under special market conditions; in the delivery month, the speculative positions as well as newly opened and closed-out positions shall be held in multiples of thirty (30) lots.

Article 46 If the Exchange makes a forced position reduction to a hot-rolled coil futures contract, the amount of the unfilled orders subject to the order fill, positions eligible to fill the unfilled orders, and the principles and methods for the order fill of unfilled orders shall be determined as follows:

(i) Amount of the unfilled orders subject to the order fill. The term “amount of unfilled orders subject to the order fill” means the total amount of all the unfilled orders submitted after the close of the base date at the limit price into the central order book by each Client who has incurred losses on net positions in the contract of an average level of no less than six percent (6%) for hot-rolled coil futures contracts, of the settlement price of the base date.

(ii) Positions eligible to fill the unfilled orders. The positions eligible to fill the unfilled orders include the net positions, on which the Client, as calculated using the above formula stipulated in the Risk Management Rules of the Shanghai Futures Exchange, records average gains for speculative purposes or for hedging purposes at no less than six percent (6%).

(iii) Principles for the order fill of unfilled orders. The order fill of unfilled orders shall take place in the order of the following four levels with regard to the amount of gains and whether such positions are speculative or hedging:

Level 1: Unfilled orders shall be filled with the speculative positions eligible to fill the unfilled orders of any Client with average gains on net positions of no less than six percent (6%) of the settlement price on the base date for the contracts in hot-rolled coil futures, or the Speculative Position Gains of Over 6%;

Level 2: Unfilled orders shall be filled with the speculative positions eligible to fill the unfilled orders of any Client with average gains on net positions of no less than three percent (3%) but no more than six percent (6%) of the settlement price on the base date for contracts with respect to hot-rolled coil futures, or the Speculative Position Gains of Over 3%;

Level 3: Unfilled orders shall be filled with the speculative positions eligible to fill the unfilled orders of a Client with average gains on net positions of no more than three percent (3%) of the settlement price on the base date for contracts in hot-rolled coil futures, or the Speculative Position Gains Below 3%; and

Level 4: Unfilled orders shall be filled with the hedging positions eligible to fill the unfilled orders of a Client with average gains on net positions of no less than six percent (6%) of the settlement price on the base date for contracts in hot-rolled coil futures, or the Hedging Position Gains of Over 6%.

(iv) Methods for the order fill of unfilled orders. If the amount of the Speculative Position Gains of Over 6% is greater than or equal to that of the unfilled orders, the unfilled orders shall be filled pro rata to the amount of the Speculative Position Gains of Over 6%. If the amount of the Speculative Position Gains of Over 6% is smaller than that of the unfilled orders, the Speculative Position Gains of Over 6% shall be filled pro rata to the amount of the unfilled orders. The residual unfilled orders, if any, shall be filled with the Speculative Positions Gains of Over 3% in the same manner as the foregoing, and if there are still orders remaining, the outstanding unfilled orders shall be filled to the Speculative Position Gains of Below 3%, and so to the Hedging Position Gains of Over 6%. Unfilled orders which eventually remain after all the order fills described above, if any, shall not be filled at all.

CHAPTER 5 MISCELLANEOUS

Article 47 Matters not covered herein shall be governed by the applicable business rules of the Exchange.

Article 48 Any violations of these Hot-Rolled Coil Futures Rules will be handled by the Exchange in accordance with the Enforcement Rules of the Shanghai Futures Exchange.

Article 49 The Exchange reserves the right to interpret these Hot-Rolled Coil Futures Rules.

Article 50 These Hot-Rolled Coil Futures Rules take effect on October 23, 2024.