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China’s Another Agricultural Product Option to Debut

Date:15 June 2018
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Dalian Commodity Exchange (DCE) released a message on June 11 that the application for corn futures option (the corn option for short) has been approved by the China Securities Regulatory Commission (CSRC). It means that another agricultural product option of China is expected to debut after soybean meal and white sugar options, which will further enrich the agricultural product derivatives instruments of China and provide the upstream and downstream subjects of corn and relevant industries with more abundant and more flexible risk management methods and trading strategies.

A DCE official said that DCE will well prepare for the listing of corn option according to the requirements of the CSRC. It will optimize relevant rules and systems, carry out emulation trading in order and continue to promote the market cultivation, thus making sure the successful launching and smooth operation of the corn option.

The stable market operation and the widespread participation of investors have been seen for the corn futures since its listing. Major domestic trading, processing, and feed and breeding enterprises have taken part in corn futures trading, and some corn enterprises have begun to trade by way of futures pricing. As a result, the functions of corn futures have been deepening, and its market has become increasingly mature. In particular, with the promotion of the supply-side structural reform in agriculture in recent years, the spot prices of corn have become market-oriented, the price fluctuation has been remarkably increased, the risk-avoiding demands of agriculture-related subjects have got stronger, and the trading scale of the corn futures market have been greatly enhanced. Statistics show that the trading volume of corn futures of DCE was 130 million contracts in 2017, the 2nd in the Global Agricultural Futures Options Ranking released by FIA. In 2017, 290,000 clients participated in corn futures trading, and the average open interest of institutional clients accounted for 42%. That is to say, the underlying market’s fundamental and the client basis’ condition have been ready for the listing of corn option.

DCE listed China’s 1st commodity option – soybean meal option on March 31, 2017. Over the past year, the soybean meal option system has run smoothly with moderate mobility; investors have been rational in trading; institutional clients have been active in participation; the pricing has been reasonable and effective and presented a good interaction with the quantity and price in the underlying market. And it has exerted a positive influence on the futures market and become an effective risk management instrument for investors. The operation of the option rules and systems of domestic agricultural products has been fully proven by the practices, which has laid a solid foundation for the smooth launching of the corn option.

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