Dalian Commodity Exchange (DCE) released the Management Measures on Futures Trader Suitability of Dalian Commodity Exchange on May 30 after combining the trader suitability systems for options and specified futures products, adjusting and optimizing the contents of suitability management such as basic knowledge and trading experience, increasing the mutual recognition of suitability assessment, and expanding the scope of exempted clients. The previous Management Measures of Dalian Commodity Exchange for Suitability of Traders of Specified Domestic Futures Products and the Management Measures of Dalian Commodity Exchange for Options Investor Suitability were abolished simultaneously.
Unifying and Optimizing the Suitability System for Options and Specified Futures Products
According to the notice, the revision mainly involves four aspects. First, DCE has combined the previous suitability systems for options and specified futures products to form the management measures on futures trader suitability. Afterwards, it has unified the suitability admittance criterion and the execution requirements on the basic knowledge, trading experience and available fund balance of options and specified futures products. Besides, the suitability management contents of all futures exchanges in China have been unified.
Second, DCE has adjusted and optimized relevant contents concerning the suitability admittance criterion. For example, it has united the knowledge tests for specified futures products and options into one and optimized the test questions; it has expanded the accepted scope of trading experiences, accepting simulation trading experiences in China and other trading experiences of derivatives centrally cleared in domestic and overseas trading venues, and canceled the requirement on options simulation exercise experiences. Besides, the execution and operation requirements on available fund balance, compliance and integrity and internal system have been optimized correspondingly.
Third, DCE has increased some articles on the mutual recognition of suitability assessment. According to the new Measures, clients that have passed DCE’s suitability assessment will automatically obtain the trading authority for other listed products of DCE in the same account-opening institution without going through another suitability assessment; and clients that have the trading authority for products under the suitability system in domestic trading venues can be exempted from the suitability assessment on basic knowledge, trading experience and available fund balance.
Fourth, DCE has expanded the scope of clients exempted from suitability assessment. Apart from market makers and special corporate clients that have been included in the exempt scope by the exchange, professional investors meeting the requirements in the The Measures for the Suitability Management of Securities and Futures Investors and clients with a long time of trading experience can be exempted from the suitability assessment on basic knowledge, trading experience and available fund balance.
In addition, DCE has released the “Business Guidance for Futures Trader Suitability of Dalian Commodity Exchange” to clarify relevant details and operation requirements of the suitability system, amended the “Business Guidance of Dalian Commodity Exchange for Options”, and abolished the previous “Business Guidance of Dalian Commodity Exchange for Suitability of Traders of Specified Futures Products”.
Enhancing the Convenience of Involving in Options and Specified Futures Products
DCE listed soybean meal options on March 31, 2017, and its iron ore futures officially ushered in overseas traders on May 4, 2018. According to relevant business demand and to guarantee the stable, standard and sound operation of the market, prevent market risks and maintain investor’s legitimate rights and interests, DCE has formulated the Management Measures of Dalian Commodity Exchange for Option Investor Suitability and the Management Measures of Dalian Commodity Exchange for Suitability of Traders of Specified Domestic Futures Products, which were released and came into force on March 7, 2017, and March 27, 2018, respectively. The combination of the above-mentioned two measures is the system optimization made according to the market performance and feedback after the listing of soybean meal options and the introduction of overseas traders of iron ore futures.
According to the new Measures, traders involving in the trading of specified futures products and options in the same exchange or different exchanges generally needs to go through one suitability assessment, which will greatly reduce the repeated work of account-opening institutions and traders and improve the account-opening efficiency. Besides, the optimization on various admittance requirements, the expansion of the exemption scope for suitability assessment, and the newly-added mutual recognition of suitability assessment will further simplify a client’s application and provide domestic and overseas traders with a more convenient channel to trade options and specified futures products.
Market participants generally believed that the listing of options has offered more flexible and diversified risk management instruments for various enterprises in the industry chain and also provided professional investors and investment institutions with diversified trading strategy selections, thus gradually expanding the recognition and participation of the market. With the promotion of China’s iron ore futures in the overseas markets, more and more overseas clients have shown strong interests in China’s futures market. The optimization of relevant rules will offer more convenience for domestic and overseas clients to involve in the futures and options market of China, increase the enthusiasm of relevant parties in trading options and specified futures products in China, and it will be of positive significance for enriching the participation degree of the futures market, strengthening its opening-up and boosting the sound and stable development of the Chinese derivatives market.
DCE has successfully listed the soybean meal and corn options. On the whole, the options market has presented stable operation, expanded market scale, balanced client structure, active and rational participation of investors, reasonable and effective pricing, and great interaction with the underlying futures market, thus giving full play to its role of serving the real economy. And stable operation, adequate market scale and sufficient liquidity have been seen in the futures market since iron ore futures ushered in overseas traders. Till May 30, a total of 133 institutional and individual clients from 14 countries and regions like Hong Kong, Singapore,the U.K., Australia and Japan have opened accounts, and steady increase has been seen in the open interests of the overseas clients, showing that various international systems of the exchange have been fully tested by the market.
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