Refining listed products, improving capacity for market service
Systems to be adjusted and perfected next year, including introduction of 3-step delivery
Recently, Dalian Commodity Exchange (DCE) issued a notice that it has revised the corn delivery quality standards. In fact, it is only one of the serial achievements made this year by DCE in maintaining the listed products. In addition to the adjustments to the quality standards of the corn futures product in delivery, DCE has continuously refined the market and improved the capacity for market service by modifying futures contracts and quality standards, perfecting relevant systems and reducing trading and delivery costs, thus keeping a good maintenance of the listed products.

Adapting to market changes and demands, modifying contracts and quality standards
One of the highlights of DCE's efforts in maintaining the existing products is modifying and improving the contracts and the delivery quality standards according to the changes of the patterns and demands on the spot market. Since 2012, DCE has successively revised and improved the four contracts of RBD Palm Olein, No. 1 Soybeans, Corn and LLDPE.
According to a DCE official, in terms of the product of RBD Palm Olein, since the national standard of palm olein was implemented in October 2009, in recent years, new changes of the acid value and other indicators have gradually taken place in the demands of the spot trade as the too strict acid value and other indicators on the futures market began to show discrepancy with the actual demands of the spot market. In order to further reflect the spot trade, on the basis of thorough survey and research, DCE improved the acid value indicator of the palm olein in February last year by moderately relaxing it.
With regard to the contract of No. 1 soybeans, given that the former delivery alternatives had low delivery standards, some delivery products of No. 1 Soybeans deviated from the quality of the dominant spot trade and the former standards of premiums and discounts were not consistent with the spot market, in December last year, DCE adjusted the delivery quality standards of the No. 1 Soybeans contract by cancelling the Grade V soybean in delivery, setting a discount for the Grade IV soybean and merging the premiums for Grade I and Grade II soybeans, as well as relaxing the permissible range of the damage grain rates of the alternatives and setting the appropriate premiums and discounts.
With respect to the futures product of corn, to address the significantly increased unit weights of the spot goods and the lower delivery quality standards of the corn contracts than the spot market, recently DCE adjusted the unit weight of the standard delivery products of corn from 650g / L to 675g / L, that of the alternatives from 620g / L to 650g / L, the discount from RMB 20 / ton to RMB 40 / ton; the proportion of the alternatives with moldy grains is adjusted to not less than 3% from not less than 4% and the discount was adjusted from RMB 25 / ton to RMB 50 / ton. The corn futures have been more in line with the spot market, and the level of serving the real economy has been improved.
With regard to the LLDPE product, DCE has carried out continuous follow-up analysis on the feasibility of the new national standards after their launching in 2010. Last year, DCE has conducted several demonstrations on the necessity and feasibility of adjusting the delivery quality standards of the LLDPE futures contract. At present, according to the demonstration of the adjustment scheme on particle appearance and tensile property based on the change of the spot market, DCE will promote the improvement of this product's quality standards at the proper time.
Improving old products' delivery system and rules and enhancing futures market's level of serving the real economy.
Delivery is an important link that connects the futures and the actual and promotes the display of market functions and the risk prevention and control. In recent years, especially in this year, DCE has centered on further facilitating enterprises' delivery, reducing delivery cost, enhancing market efficiency, and improving the service level of delivery business while improving the quality standards of old products contract, with an aim to promote the adjustment and improvement of the delivery system of a series of old products.
With regard to the adjustment and improvement of the delivery system, one measure that has the most far-reaching influence on the long-term development of the market is to set up warehouses in the major soybean producing areas. In order to enhance the futures market's capacity of serving the agriculture, farmer, and rural area and the soybean industry, strengthen the representativeness and influence of the No. 1 soybean contract price, and respond to the market demands, DCE set up two non-standard delivery warehouses in Heilongjiang Province (a major soybean producing area) in March of this year, the Harbin Warehouse of the State Grain Reserve and Yihai Kerry (Harbin) Grain and Oil Industry Co., Ltd., and made the Jiusan Group Harbin Soybean Products Co., Ltd. as the spare warehouse.
In order to solve the difficulty of uncertain delivery place frequently faced by the buyers in China's futures market, DCE conducted the intra-group factory warehouse receipts swap business for soybean meal futures in December of this year and the first batch of pilot groups are China Agri-Industries Holdings Limited and Cargill Investment (China) Co., Ltd. According to the warehouse receipts swap measures, clients buying in the soybean meal standard warehouse receipts of the factory warehouses affiliated to the pilot groups on the final delivery day may apply for taking the spot goods at the groups' other factory warehouses or swapping for the standard warehouse receipts of the groups' other factory warehouses, which will bring convenience to feed enterprises and other buyer clients in delivery, remarkably reduce the cost, help the feeding and breeding industry to enhance the risk management level, and provide reference to the delivery products in other warehouses.
The bonded delivery is also a key work continuously promoted by DCE in recent years. This year, the promotion of the pilot bonded delivery business of the LLDPE product has achieved many breakthroughs. On September 12, 2013, the General Administration of Customs officially approved DCE's pilot of the LLDPE futures bonded delivery business in the Dongjiang Free Trade Port Zone of Tianjin and relevant detailed business rules are currently under research and improving.
Concerning PVC products, DCE has been researching and promoting delivery and brand registration system since the beginning of this year according to the situation that spot PVC trading carries distinctive brand characters and considerably large spread exits between different brands, and it is now undertaking the brand collection work. Concerning coke products, DCE is researching and demonstrating the system design of long-distance delivery, namely, to allow the completion of delivery at different ports through system design, so as to arouse the participation enthusiasm of factories and to promote the full playing of industrial service functions of coke products.
Reinforce the completion of integral market system, and Keep improving the market operation efficiency as well as the risk prevention and control ability
While amending and improving contract system of old products, DCE also focused on the construction and completion of integral basic market system, so as to improve market operation quality and service ability in an all-round way. After amending hedging trading management measures and carrying out the qualification accreditation and limit management systems on hedging last year, this year, DCE kept strengthening the comprehensive system construction, including amending the risk management measures, establishing the arbitrage trading management measures, and amending the position limit pattern of futures company members, so as to further reduce transaction costs, as well as improve market efficiency and market operation quality.
At present, a key task of DCE on the completion of the market's basic system is to promote the implementation of "three-step delivery", with which DCE aims to adjust the one-time delivery process at present to a three-step delivery of "first deliver, next choose, and then pay", so as to solve the current problem of buyers not being sure of delivery places and delivery being detrimental to buyers from the basic system.
At the "2013 China Plastics Industry Conference" held this June in Ningbo, an official of DCE noted that, against the new situation that considerably big changes occurred in market development environment, DCE insisted on the policy of "holding with both hands", strived to improve market efficiency, promoted the display of the functions of the futures market, and kept improving the ability of serving the real economy. A specific embodiment of this thinking of work of DCE was the continuous promotion of the adjustment and improvement of the DCE contract system since the beginning of last year, which was also the best response to the work efficiency of DCE.
Market operation also responded strongly to the efficiency of DCE's serial work projects. In November this year, the trading volume (unilaterally, the same below) and amount of futures on DCE reached 646 million contracts and RMB 43.80 trillion respectively, an increase of 11.59% and 46.64% over the same period of last year, among which the trading volume and amount of old products are 612 million contracts and RMB 41.46 trillion, an increase of 5.69% and 38.79% year on year. The market's service ability was also enhanced. Under the impact of bird flu in April and May this year, some domestic feed and breeding enterprises transferred spot losses by making use of soybean meal and corn futures. In the second half of the year, against the decline of coke and coal demands and the continuous drop of prices, coke and coal enterprises actively participated in risk avoidance of coke and coal futures, which fully demonstrated the function of the futures market's serving industries and the real economy.
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