On June 27, Dalian Commodity Exchange (DCE) released the "Notice on the Issues Related to the Night Trading”, confirming the launching of the night trading at 21:00 on July 4 with the RBD Palm Olein and Coke as the first listed products for the night trading, and DCE will gradually introduce other products on the night trading in accordance with the market operation.
In recent years, it has been a trend for the foreign exchanges to enhance the market competitiveness by increasing trading hours to cover more time zones and developing and serving broader global market, and some exchanges have extended the business to different time zones in Europe and America and even Asia in acquisition, merger, mutual listing and other forms, making their trading platforms cover almost all the times zones and greatly helping and attracting the traders from around the world. Compared with the international markets, the domestic futures exchanges feature few trading hours in general, with the futures prices’ adequate absorption and reflection of the market information damaged to some extent, and it is also detrimental to further enhancing the international influence of the domestic market.
And after 20-plus years of development, the futures market in Dalian has seen the size continuously increased, the smooth operation, the sound functioning and the international influence constantly improved, with some products having shown the advantages in seizing the pricing power in the international market. Under the new situation that currently the market has seen the opening up accelerated and the internationalization continuously deepened, the introduction of the night trading to cover more time zones in the trading will help further deepen the market functioning in price discovery and hedging, improve the international influence of the market, and especially lay the foundation for DCE to internationalize the advantageous products as soon as possible and expand the service in the international market in the future; it will also ease the overnight risks of the positions of the products with strong international interaction and the problem of price discontinuity. After the introduction of the night trading, DCE will increase the trading hours on each trading day from 5 hours at present to 11 hours, covering more time zones.
In terms of the selection of the products for the night trading, during the preparatory market survey and opinions solicitation, the market participants believed that among the existing 15 futures products of DCE, with brisk trading, extensive market participation and high-degree attention of industrial clients and investors from home and abroad, all the products of soybeans, soybean meal, soybean oil, corn, RBD palm olein, LLDPE, PVC, PP, coking coal, coke and iron ore have the basis for the night trading. The trial in RBD Palm Olein and Coke has reflected the consideration in pilot preceding promotion and ensuring the sound operation of the night trading.
With regard to the currently confirmed products for pilot, the market participants believe that as the mature and dominant products of DCE, RBD Palm Olein and Coke are advantageous in piloting the night trading.
First, internationally, both RBD Palm Olein and Coke have enjoyed significant influence in the international market, boasting the advantage in seizing the pricing power on the international market in the future. China is the world's largest palm oil importer and largest coke exporter. As the typical international agricultural and industrial products, with moderately brisk trading and huge potential international influence, RBD Palm Olein and Coke are suitable pilot products for DCE in launching the night trading. Currently, DCE tops the world in the trading volume of palm oil, about 7 times that of Bursa Malaysia according to the calculation on a comparable basis, and no international coke derivatives can compete with the coke product of DCE.
Second, the demand for preventing the overnight gap risk is also found in the two products. Data show that the price gaps of palm oil and coke are 71% and 36% respectively. The selection of RBD Palm Olein and Coke is aimed to meet the demand of the oil enterprises and coke enterprises, especially the clients of producing enterprises with certain sizes who have been using the foreign market for hedging, in a bid to remedy the current situation that the hedging cannot be completed timely as a result of the different trading hours as well as further enhance the interaction of relevant products with the international market prices.
In addition, palm oil and coke feature the high proportion of participation and concentrated proportions of positions of industrial clients and institutional clients. According to the statistics on the basis of the samples from 2008 to 2013, DCE records the proportion of the open interest for the unit clients at about 53% with that of coke at 17% as a result of the late listing. The selection of the two products will help meet the demand of the real economy for price hedging and bring the market functions into further play.
Market participants also pointed out that DCE’s introduction of the night trading and selection of the products shows that DCE is active in participating in the international competition. On the one hand, DCE has designed to introduce the products advantageous in pricing on the international market in the future so as to further expand the international influence of relevant products and make preparation for participating in international competition in the future; on the other hand, it has also considered preventing the overnight risks for the products closely related to the international market prices. Equal emphasis has been put on the two aspects instead of just passively considering the prevention of the risks transferred from the international market. The selection of the two listed products of RBD Palm Olein and Coke has reflected such guideline of DCE.