Two routes are available for overseas investors to open accounts
As China's first options product opening to overseas investors, the RBD palm olein options have attracted close attention in both domestic and overseas markets. It is recognized as an innovative measure of opening Chinese futures market to the outside world. There has been a heated discussion in the market over some major issues, such as "which clients can participate in RBD palm olein options trading", "what requirements the trader suitability place on the qualification of new clients", and "how to open accounts for customers who meet the requirements". In this regard, a representative of Dalian Commodity Exchange (DCE) answered the questions related to management measures on trader suitability and process of opening an account.
According to the representative, RBD palm olein options will follow the current management measures on futures traders suitability, and the process of opening an account for overseas investors is consistent with the current requirements. In the measures of traders suitability, it has set up the access conditions such as knowledge test, trading experience, available funds, compliance and credit, etc. DCE makes it clear in the relevant rules for traders how to open an account and what matters should be noticed in opening an account after passing the suitability review.
In terms of traders suitability, first, to ensure that traders have a good understanding of the basic knowledge of futures and the operating principle of futures before participating in trading, individual clients and relevant business personnel of institutional clients are required to pass the futures knowledge test, which includes the basic knowledge of trading, clearing, delivery, risk management, law and more. Traders take online knowledge test on the test platform of futures trader suitability knowledge of China Futures Association. The total score of knowledge test is 100 points, 80 points and above is qualified. Overseas clients can show that they have the knowledge level required by the Management Measures on Futures Trader Suitability of Dalian Commodity Exchange and take the consequences of providing false promises by issuing a commitment letter.
Second, to ensure that the traders have a certain level of trading and risk management ability, DCE requires that traders should have real trading experience. For simulated trading experience, the trader should provide the futures contract or options contract trading settlement statements and other documents of the joint testing system and simulation system of domestic trading venues issued by the securities companies, futures companies and other institutions, to prove that he/she has records of no less than 20 executed orders and of no less than 10 accumulative trading days of simulated trading. For domestic trading experience, securities companies, futures companies and other institutions should issue trading settlement statements and other documents to prove that the trader has records of no less than 10 executed orders in futures trading, options trading or in trading of any other centrally cleared derivative(such as swap) on any domestic trading venue within the last three years. For overseas trading experience, the trader should provide the trading record details, settlement statements or other documents of the overseas trading venues regulated by its competent futures regulatory authority which has entered into a memorandum of understanding on regulatory cooperation with the China Securities Regulatory Commission ("CSRC"), to prove that he/she has records of no less than 10 executed orders in futures trading, options trading or in trading of other centrally cleared derivative (such as swap) within the last three years (each such executed order on such overseas trading venue a "Recognized Overseas Trading Record").
Third, to ensure the trader has a certain risk tolerance ability, the trader's daily available funds balance in the margins account should be no less than CNY 100,000 or equivalent foreign currency for the five consecutive trading days preceding the application for the trading code or trading authority. The sum of CNY and foreign currency balances should ensure that the trader has a certain fund base.
Finally, DCE requires that traders should not have material adverse credit records or the experience of being declared as the prohibited futures market accessor by any competent regulatory authority, and having not been prohibited or restricted to engage in the futures trading pursuant to the laws, administrative regulations or rules, or the rules of the Exchange; For institutional clients, apart from the above requirements, they should also have the relevant policies of internal control, risk management and information disclosure for participating in futures trading.
For some traders, the requirements on basic knowledge, trading experience and available funds in the suitability standards may be exempted. They include:
(1) The clients who have obtained the authority to trade any other listed contract to which the suitability rules apply on any domestic trading venue (the fund requirement should be not lower than the foregoing provision);
(2) Professional investor as defined in the Measures for Management of Suitability of Securities and Futures Investors;
(3) The clients who have obtained the trading authority of any listed contract to which the suitability rules apply, and is applying for trading authority of the same contract through a different Account-opening Institution;
(4) The clients who have records of executed orders of futures trading, options trading or in trading of any other centrally cleared derivative on any domestic trading venue, or having Recognized Overseas Trading Records for no less than 50 accumulative trading days during the last year; or
(5) The market makers, special institutional investors and other traders recognized by the exchange.
As for account opening process, overseas investors can choose two routes to open an account. The first is to directly open an account, that is, the client opens an account through the domestic futures company, which opens the account for the client through the unified account opening platform of China Futures Market Monitoring Center. The second is to open an account by sub entrustment, that is, the client opens an account through an overseas intermediary, which, in turn, entrusts a domestic futures company to conduct trading. For domestic clients, the application process for trading authority has not changed. The client submits a written application to the futures company, which will verify the identity information and the suitability of trader, etc. After the verification, the corresponding trading authority will be opened.
The representative noted that traders should perform comprehensive self-assessment of their knowledge on the market and the products, their risk control and tolerance capabilities, and their financial capabilities based on the suitability rules, and prudently decide whether to participate in futures trading accordingly, to avoid accidental losses due to entry into the market without taking into full consideration. Going forward, DCE will continue to optimize the suitability measures, improve the efficiency of the opening of trading authority on the premise of effectively protecting the interests of traders, provide easy access for traders to enter Chinese options market, and effectively leverage the functions of the options market.
Disclaimer: This English translation may be used for reference only. In cases there is any discrepancy between the English version and the original Chinese version, the original Chinese version shall prevail. Dalian Commodity Exchange may change or update this English translation without any prior notice and shall accept no responsibility or liability for damage or loss caused by any error, inaccuracy, misunderstanding, or change with regard to this English translation.