China Expands Foreign Access to Commodity Futures Markets
The China Securities Regulatory Commission announced on Feb. 9 that the Shanghai International Energy Exchange, which is part of the Shanghai Futures Exchange, will begin trading its much anticipated crude oil futures contract on March 26. The INE was set up specifically for the purpose of developing this contract as an international benchmark, and the exchange's rules are designed to encourage participation by foreign brokers and foreign traders.
The contract will be physically settled, with the size based on 1,000 barrels of oil, the same amount as the WTI and Brent futures that trade in New York and London. The deliverable crudes consist of six Middle Eastern medium-sour grades as well as Shengli, a domestic crude.
In related news, the CSRC announced on Feb. 2 that the Dalian Commodity Exchange will be allowed to open its iron ore futures market to foreign market participants. No dates have been set yet, but the announcement marks the beginning of a process that may allow foreign and domestic market participants to trade on the same venue.
The exchange said the contract will continue to be priced and settled in RMB, but margin requirements will be adjusted to allow collateral in U.S. dollars and offshore RMB. The exchange also said foreign brokers and traders will be required to open futures settlement accounts and foreign exchange settlement accounts with depository banks in China.
