FUEL OIL FUTURES RULES OF THE SHANGHAI FUTURES EXCHANGE

CHAPTER 1 GENERAL PROVISIONS

Article 1 These Fuel Oil Futures Rules are made in accordance with the General Exchange Rules of the Shanghai Futures Exchange, the SHFE Fuel Oil Futures Contract Specifications, and the relevant business rules to regulate business related to fuel oil futures at the Shanghai Futures Exchange (the “Exchange”).

Article 2 These Fuel Oil 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 fuel oil futures is ten (10) metric tons per lot.

Article 4 Price quotation (exclusive of taxes) of a fuel oil futures contract is Yuan (RMB)/metric ton.

Article 5 Minimum price fluctuation of a fuel oil futures contract is one (1) Yuan/metric ton.

Article 6 Listed contracts of fuel oil futures cover the most recent twelve (12) months.

Article 7 Trading hours of a fuel oil 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 fuel oil futures contract is the last trading day of the month before the contract month. The Exchange may adjust the date of the last trading day according to national legal holiday arrangements.

Article 9 Contract symbol of fuel oil futures is FU.

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

Article 11 An application for a regular month hedging quota of a fuel oil futures contract shall be submitted by the last trading day of the third 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 fuel oil futures contract shall be submitted between the first trading day of the fourth month before the delivery month of the contract and the last trading day of the second 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 fuel oil 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 second month before the delivery month. Late applications will not be accepted by the Exchange.

Article 12 Hedging quota of a fuel oil 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 fuel oil futures contract may be physically delivered through an Exchange of Futures for Physicals (“EFP”) or a delivery warehouse.

Fuel oil futures adopt bonded delivery.

Article 14 Grade and quality specifications are provided in the SHFE Fuel Oil Futures Contract Specifications.

Article 15 Delivery unit of a fuel oil futures contract is ten (10) metric tons.

Article 16 Delivery period of a fuel oil futures contract is the two (2) consecutive business days immediately following the last trading day of the contract.

Article 17 The benchmark price for delivery settlement of a fuel oil futures contract is the arithmetic average of the settlement prices of that contract over the last five (5) trading days on which it was traded.

Article 18 Any Client who is unable to provide or accept the tax invoices specified by the Exchange is not permitted to engage in physical delivery.

Article 19 The seller shall submit the Exchange-specified tax invoice within five (5) business days following the last trading day.

If the buyer and the seller complete such delivery procedures as the submission and receipt of bonded standard warrant, commodity payment, and the tax invoices specified by the Exchange by 2:00 p.m. on that day, the Exchange will release the corresponding margin funds on the same day; if such procedures are completed after 2:00 p.m., the Exchange will do so during the clearing on the following trading day.

Article 20 Delivery venue: the fuel oil delivery warehouses of the Exchange, to be separately announced by the Exchange.

SECTION 2 DELIVERY PROCEDURES

Article 21 The quality of fuel oil shall be established at load-in and load-out by the Designated Inspection Agencies of the Exchange (the list of which is to be separately announced by the Exchange) using the sampling method specified in GB/T 4756 and the test methods specified in the SHFE Fuel Oil Futures Contract Specifications.

The inspection agency for fuel oil intended for load-in shall be selected from the foregoing list by the seller; the inspection agency for fuel oil intended for load-out shall be selected from the list by the buyer. If the fuel oil delivery warehouse does not agree with the buyer’s or seller’s choice, it may negotiate with the relevant party for a replacement. If the negotiation fails, the fuel oil delivery warehouse may apply to the Exchange to select an inspection agency for them. The buyer, seller, and fuel oil delivery warehouse shall cooperate with the Designated Inspection Agency in the inspection process. Unless otherwise provided in these Fuel Oil Futures Delivery Rules, the load-in inspection fee shall be borne by the seller, the load-out inspection fee shall be borne by the buyer.

Article 22 An owner of fuel oil shall coordinate with relevant parties such as the dock, port, pipeline companies, customs, and inspection agencies before submitting its load-in application to the Exchange no later than fifteen (15) days prior to the proposed date of load-in. A Client shall authorize its carrying FF Member to submit the load-in application (delivery notice).

Article 23 If storage capacity permits, the Exchange will determine whether to approve a load-in application within three (3) business days of receiving relevant application materials based on the owner’s intents. Following approval, the owner shall ship commodity to the relevant fuel oil delivery warehouse within the load-in period, which is fifteen (15) days from the date of approval. The Exchange may adjust the load-in period as appropriate.

Article 24 An owner shall provide true and accurate materials for the load-in application and shall pay an application deposit of thirty (30) yuan/metric ton, which will be deducted by the Exchange from the relevant Member’s clearing deposit.

The Exchange shall return the application deposit to the Member’s clearing deposit after the owner has completed the load-in procedures and received the bonded standard warrants. If only a portion of the quantity specified in the load-in application is loaded in, the corresponding application deposit to the shortfall shall be credited to the fuel oil delivery warehouse as compensation; if none of the specified quantity is loaded in, the deposit shall be fully credited to the fuel oil delivery warehouse as compensation. Where the actual load-in quantity is within the quantity overfill or underfill for the futures contract, the deposit shall be fully refunded.

Article 25 Before unloading, an owner shall engage a Designated Inspection Agency to test the fuel oil for density, kinematic viscosity, sulfur content, moisture, and flash point in accordance with the standards and methods specified in the futures contract. Fuel oil shall be unloaded only after passing the test.

Article 26 A fuel oil delivery warehouse shall inspect the fuel oil it receives and verify the accompanying documentation.

Article 27 An owner shall engage a Designated Inspection Agency to inspect its fuel oil at load-in. The inspection consists of quality assay and weight inspection.

(i) Quality inspection

Prior to load-in, the Designated Inspection Agency shall take and seal fuel oil samples from the ship tanks or other transport containers (Sample A) and from the warehouse (Sample B). Sample A is further divided into A1, comprising several samples taken from each ship tank or each container, and A2, a mixture of all the samples of A1. After load-in, the Designated Inspection Agency shall take a sample of the mixed fuel oil in the warehouse (Sample C), test it, and issue a testing report. If Sample C is qualified, it means the fuel oil delivered by the owner is of satisfactory quality and the testing report shall serve as the inspection report for such fuel oil.

If Sample C is unqualified, the Designated Inspection agency shall test Sample A and Sample B, with one of the following four outcomes:

(1) Sample A is qualified and Sample B is unqualified. This means the fuel oil delivered by the owner is of satisfactory quality. The fuel oil delivery warehouse shall be held accountable for the unqualified mixed fuel oil in the warehouse and shall bear the testing expenses for Samples A and B.

(2) Sample A is unqualified and Sample B is qualified. This means the fuel oil delivered by the owner is of unsatisfactory quality. The owner shall be held accountable for the unqualified mixed fuel oil in the warehouse and shall bear the testing expenses for Samples A and B.

(3) Both Sample A and Sample B are qualified. This means the fuel oil delivered by the owner is of satisfactory quality. The fuel oil delivery warehouse shall be held accountable for the unqualified mixed fuel oil in the warehouse and shall bear the testing expenses for Samples A and B.

(4) Both Sample A and Sample B are unqualified. This means neither the fuel oil delivered by the owner nor that held by the warehouse before the load-in is of satisfactory quality. The owner and the fuel oil delivery warehouse shall be held jointly accountable for the unqualified mixed fuel oil in the warehouse, and respectively bear the testing expenses for Samples A and B.

In all these four scenarios, Sample A will be deemed unqualified if any sample from Sample A1 or A2 fails the test. In this case, the testing report for Sample A shall serve as the inspection report for the fuel oil delivered by the owner.

(ii) Weight inspection. The weight of fuel oil loaded in shall be measured by the shore tanks of the fuel oil delivery warehouse.

Article 28 The owner shall ensure the fuel oil it delivers meets the quality standards of the Exchange, and assume full responsibilities and liabilities arising from a material quality degradation (i.e., failing to meet the quality standards of the Exchange) of the entire tank of fuel oil due to the unqualified quality of the fuel oil it delivers.

Article 29 An owner shall oversee the load-in of its fuel oil into the fuel oil delivery warehouse, or be deemed to have agreed the testing results of the Designated Inspection Agency.

Article 30 An owner shall provide the original or photocopy of such required documentation for delivered commodity as the testing certificate issued by the Designated Inspection Agency, warehouse receipt, commodity inspection certificate issued by the loading port, customs load-in approval document, and inspection certificate for bonded pre-mixed marine fuel oil, which will be returned by the Exchange after being verified and photocopied.

Article 31 After load-in and acceptance of fuel oil, the carrying Member shall bring the required documentation for delivered commodity to the Exchange for review and verification. Once the documentation is verified, the Exchange will instruct the fuel oil delivery warehouse to issue bonded standard warrants through the Standard Warrant Management System.

Article 32 A bonded standard warrant for fuel oil is valid till the last delivery month of the second year following its effectiveness, after which month the underlying fuel oil will be converted to physical products.

A fuel oil delivery warehouse shall transfer fuel oil underlying expired bonded standard warrants to the physical fuel oil tank.

Article 33 The minimum load-in or load-out weight for fuel oil is one thousand (1,000) metric tons, unless, in the case of load-out weight, the owner and the fuel oil delivery warehouse have agreed on another quantity.

Article 34 Take delivery

(i) Where the lawful bearer of a bonded standard warrant intends to take delivery, the fuel oil delivery warehouse shall release the commodities after verifying the bonded standard warrant. The owner may take delivery directly or indirectly by authorizing the fuel oil delivery warehouse to ship the commodity.

(ii) Any lawful bearer of a bonded standard warrant who intends to take delivery shall engage a Designated Inspection Agency to conduct on-site inspection on the quality and weight of the fuel oil to be delivered. The weight of fuel oil loaded out shall be measured by the shore tanks of the fuel oil delivery warehouse. Quality inspection shall be based on samples taken from the tank, which are to be divided into Sample A, to be used for testing, and Sample B, to be sealed and preserved.

Any owner who does not engage a Designated Inspection Agency to conduct the inspection shall be deemed to have approved the quality and weight of the shipment and the fuel oil delivery warehouse and the Exchange will no longer handle any objection regarding the fuel oil thus delivered.

(iii) Any lawful bearer of a bonded standard warrant who disputes the quality of the delivered fuel oil shall submit a written objection, accompanied by the quality inspection results issued by the Designated Inspection Agency, to the fuel oil delivery warehouse within ten (10) business days following the issuance of the testing report by the Designated Inspection Agency; failing which, the bearer shall be deemed to have no objection over the delivered fuel oil and the fuel oil delivery warehouse and the Exchange will no longer handle any objection regarding any fuel oil thus delivered.

(iv) When shipping any fuel oil, the fuel oil delivery warehouse shall complete a Load-out Confirmation Form for Bonded Standard Warrant in duplicate, one for the owner and one for itself, and properly retain its copy for future review.

Article 35 Loss compensation and overfill or underfill

(i) Loss compensation

The owners of fuel oil at load-in and at load-out shall respectively pay the fuel oil delivery warehouse the load-in loss compensation and the load-out loss compensation according to the formulas below, which shall be settled within three (3) business days after the relevant Designated Inspection Agency issues a testing report:

Load-in loss compensation = weight of fuel oil indicated on the issued bonded standard warrants × 0.6‰ × (settlement price of the nearest month fuel oil futures contract on the trading day preceding the load-in completion day + delivery premiums or discounts);

Load-out loss compensation = weight of fuel oil indicated on the issued bonded standard warrants × 0.6‰ × (settlement price of the nearest month fuel oil futures contract on the trading day preceding the load-in completion day + delivery premiums or discounts);

(ii) Overfill or underfill

“Overfill or underfill” for fuel oil at load-in or load-out refers to the difference between the weight indicated on the weight certificate issued by the Designated Inspection Agency and the weight specified on the issued or canceled bonded standard warrant. For fuel oil, the weight overfill or underfill at load-in or load-out shall not exceed ±3% and shall be settled by the owner directly with the fuel oil delivery warehouse according to the formula below within three (3) business days after the Designated Inspection Agency issues the testing report:

Load-in or load-out overfill or underfill payment = allowable quantity overfill or underfill of fuel oil × (settlement price of the nearest month fuel oil futures contract on the trading day preceding the load-in or load-out completion day + delivery premiums or discounts);

Article 36 The bonded final settlement price of an expired fuel oil futures contract shall be the basis for assessing the duty-inclusive price for the bearer of corresponding bonded standard warrant. The formula for calculating the bonded final settlement price is: bonded final settlement price = final settlement price.

The delivery payment corresponding to a bonded standard warrant for fuel oil is:

Delivery payment for expired contract = bonded final settlement price × delivery quantity;

Delivery payment for EFP = EFP bonded final settlement price × delivery quantity;

Article 37 The buyer and the seller shall themselves arrange the transportation options if they intend to conduct physical settlement at a delivery venue.

Article 38 A fuel oil delivery warehouse shall assume full responsibilities for the quality, safety, and other relevant aspects of any fuel oil in storage from its acceptance and load-in to its load-out.

Article 39 Load-in and load-out operations at a fuel oil delivery warehouse shall not impair the quality and weight of fuel oil. A fuel oil delivery warehouse shall, both before and after each load-in or load-out, ensure that the pipelines are either fully filled or emptied, that oil inside the pipelines will not affect the quality of the oil to be loaded in or out, and that oil may flow freely inside the pipelines. The temperature of the fuel oil at load-in and load-out shall not be lower than 35 degrees Celsius.

Article 40 Any delivery-related dispute between any buyer or seller and a fuel oil delivery warehouse shall be resolved through negotiation. If the negotiation fails, the dispute shall be submitted to the Exchange in writing within ten (10) days of its occurrence for mediation; or the Exchange will not accept the mediation application. If the mediation fails, they may, in accordance with their arbitration agreement, apply to an arbitration institution for arbitration. If such an agreement was not made or is invalid, they may initiate a lawsuit before a people’s court.

SECTION 3 EXCHANGE OF FUTURES FOR PHYSICALS

Article 41 The exchange of futures for physicals (“EFP”) is the process where the members or clients who hold opposite positions of a futures contract expiring in the same month reach an agreement through negotiation to, upon the approval of the Exchange, tender a notice of EFP to have their respective positions in such contract closed out by the Exchange at the price prescribed by the Exchange, and exchange, at the price mutually agreed upon and in the same opposite positions, the warrant or other take-delivery document of the underlying commodity which has a quantity equivalent to and is identical to the underlying commodity of the futures contract.

Article 42 The final settlement price for EFP is the price as agreed by the buyer and the seller. For an EFP that is conducted using bonded standard warrants and settled through the Exchange, the bonded final settlement price shall be as follows:

Bonded final settlement price for the EFP = settlement price of the delivery month contract on the trading day preceding the EFP Application Day.

Article 43 If the parties to an EFP intend to use bonded standard warrants and settle via the Exchange, the seller shall submit the tax invoice to the Exchange within five (5) business days following the settlement of commodity payment and bonded standard warrants. If the Exchange receives the tax invoice before 2:00 p.m., it shall, after verifying the accuracy thereof, release the corresponding margin to the seller at clearing on the same day; otherwise, the Exchange shall, after such verification, release the corresponding margin at clearing on the following business day. The Exchange shall issue a tax invoice to the buyer on the business day after the day on which it receives the seller’s tax invoice.

If the tax invoice submitted by the seller is overdue for three (3) to ten (10) days, an overdue fine of 0.5‰ of the commodity payment will be imposed for each day of delay; if overdue for eleven (11) to thirty (30) days, 1‰ of the commodity payment will be imposed for each day of delay; if overdue for over thirty (30) days, the seller shall be deemed to have failed to submit the tax invoice and be charged liquidated damages of 20% of the commodity payment.

Article 44 If the parties to an EFP intend to use bonded standard warrants and settle via the Exchange, but a dispute over the quality of the delivered physicals, the buyer shall submit an objection, accompanied by the quality inspection report from a Designated Inspection Agency, within ten (10) business days following the issuance of the report.

CHAPTER 4 RISK MANAGEMENT

Article 45 The minimum trading margin for a fuel oil futures contract is 8%.

Article 46 The stage-based trading margin rates for fuel oil futures are as follows:

Stage of Trading	Trading Margin
As of listing	8%
As of the tenth trading day of the second month prior to the delivery month	10%
As of the tenth trading day of the month prior to the delivery month	15%
As of the second trading day prior to the last trading day	20%

 

Article 47 The range of price limit for a fuel oil futures contract is within ±5% of its settlement price of the preceding trading day.

Article 48 Percentage-based Position Limit and fixed-amount Position Limit for each fuel oil futures contract at different stages of trading for an FF Member, a non-FF Member and a Client are as follows (in lots):

 

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 49 If the Exchange makes a forced position reduction to a fuel oil 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 eight percent (8%) for fuel oil 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 eight percent (8%).

(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 eight percent (8%) of the settlement price on the base date for the contracts in fuel oil futures, or the Speculative Position Gains of Over 8%;

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 four percent (4%) but no more than eight percent (8%) of the settlement price on the base date for contracts with respect to fuel oil futures, or the Speculative Position Gains of Over 4%;

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 four percent (4%) of the settlement price on the base date for contracts in fuel oil futures, or the Speculative Position Gains Below 4%; 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 eight percent (8%) of the settlement price on the base date for contracts in fuel oil futures, or the Hedging Position Gains of Over 8%.

(iv) Methods for the order fill of unfilled orders. If the amount of the Speculative Position Gains of Over 8% 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 8%. If the amount of the Speculative Position Gains of Over 8% is smaller than that of the unfilled orders, the Speculative Position Gains of Over 8% 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 4% 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 4%, and so to the Hedging Position Gains of Over 8%. Unfilled orders which eventually remain after all the order fills described above, if any, shall not be filled at all.

CHAPTER 5 MISCELLANEOUS

Article 50 Matters not covered herein shall be governed by the applicable business rules of the Exchange.

Article 51 Any violations of these Fuel Oil Futures Rules will be handled by the Exchange in accordance with the Enforcement Rules of the Shanghai Futures Exchange.

Article 52 The Exchange reserves the right to interpret these Fuel Oil Futures Rules.

Article 53 These Fuel Oil Futures Rules take effect on October 23, 2024.