According to related persons in charge of DCE when interviewing with China Securities Journal, China’s futures market has relatively poor capacity to serve the national economy, and cannot satisfy the requirements of a large number of enterprises for hedging and avoiding risks. We should further improve the efficiency of the market and play the role of the market functions to serve the national economy, and further drive the development of the futures market for the purpose of optimizing the allocation of resources.
China Securities Journal: Could you please introduce the development of China's oil and oilseed futures market? What are DCE’s achievements when its influence has been raised home and abroad in recent years?
DCE: At present, among the 29 commodities listed in China, 6 are oil and oilseed commodities, of which 5 are traded in DCE. From Jan. to Aug this year, these 5 commodities accounted for one third of the total trading volume in the futures market nationwide.
In terms of quality of the market operation, large domestic oil enterprises almost utilize the futures market to hedge and avoid risks; and there are more than 10,000 corporate clients involving in oil and oilseed exchange in DCE. The risk management capacity of industrial clients is enhanced significantly and arbitrage of oil and oilseed commodities, intercommodity arbitrage, intertemporal arbitrage and cross-border arbitrage have become the common tools for many enterprises and investors. Compared with the utilization level of related subjects on the futures market, there is still a large gap, but the oil and oilseed industry has become one of the industries with highest risk management level in the domestic market.
China Securities Journal: Since the beginning of this year, affected by the dry weather in the US, oil and oilseed have performed well. What positive role is exerted on related industries from the overall operation of the futures market?
DCE: In the first eight months this year, affected by the dry weathers of South America and North America, the prices of international agricultural products fluctuated strongly and the market players actively entered into the market to avoid risks. For this reason, the futures transactions of agricultural products were very active. During the same period, DCE recorded 387mn lots of total trading volume, and CNY 17.98 trillion. At the end of August, there was a position of 3.1363mn lots, up by 121%, 66% and 57% YoY respectively. Thus, the declining trends of trading volume and liquidity were contained and a guarantee for liquidity was provided to exert the market functions.
In terms of the price landscape, in the first eight months this year, the prices of domestic agricultural products showed a trend of ongoing rise, but the growth was far lower than that in the international market. For example, the prices of soybean meal, soybean and corn commodities in Chicago rose by 71%, 44% and 23% over the beginning of this year; the prices of domestic soybean meal and corn spots rose by 60% and 9% over the beginning of this year. The growth of domestic agricultural products futures was also lower than that of actuals. In terms of the price correlation, the correlation between the prices of related agricultural products futures and spots and that in the international market increases this year. For example, the correlation between futures and spots prices of soybean meal is over 0.99, while that of the international market is over 0.97. Between different futures contracts, a reasonable markup is also maintained well, indicating the rationality of the price movement.
In order to ensure no systematic risks and regional risks, DCE has strengthened the surveillance, monitoring and analysis on the market operation since the beginning of this year, so the market has been in the state of steady operation and controllable risk.
China Securities Journal: Could you please introduce the concrete work and plans of DCE serving the physical economy and doing well in “agriculture, rural areas and farmers” work?
DCE: First, we will further improve and modify the contract system to enhance the capacity of the futures market serving the industries. In February this year, on the basis of sufficient survey and consultation, DCE modified the quality standard and delivery rules of RBD palm olein. Next, DCE will promote the improvement of soybean futures market system and mechanism, so as to give full play of the futures market in promoting the healthy development of China's soybean industry.
Second, we will continue to improve the comprehensive trials of futures order in related regions of Northeast China, extract typical cases to spread in the production areas, so as to support more agricultural enterprises to enhance their competitiveness by using the futures market.
Third, we will depend on the external forces, expand the channels and reform the training and information service systems. Relying on forces from all aspects, such as related ministries and commissions, local governments and information institutions, , we will give full play to them; depend on diversified platforms, we will make the training and information services strong and thorough, and support futures companies to conduct training and order trial services.
China Securities Journal: From the perspective of domestic and foreign market development environments, the broadness and depth to which the futures market serves the national economy still have room to expand, at which aspects?
DCE: In general, China’s futures market has relatively poor ability to serve the national economy, and cannot satisfy the demands of a large number of enterprises for hedging and avoiding risks.
First, more commodities should be listed to serve “agriculture, rural areas and farmers” and industries. The current futures commodity system in China has just set up a framework, but there are lots of industries in urgent need of services of the futures market. For example, we should develop futures of animal products immeiately since the maket is lack of it. Second, we should further enrich the structure of derivatives. At present, there are single futures transactions in the futures market. While the market is evolving, the development of derivatives, such as options, is very necessary. Third, the design of regulations for some listed commodities should be practical to actuals and investors. This year, we have made a research on the layout of China's soybean industry; next, we will conduct a comprehensive research on the corn industry to understand its current situation, circulation pattern and development trend so as to further improve the market mechanism, thus the futures market will play a more important role in serving the economy and enhancing the industry competitiveness.