(Yicai Global) April 17 -- The Dalian Commodity Exchange (DCE) has issued details surrounding the participation of foreign investors in iron ore futures trading ahead of the scheme’s launch on May 4.
Overseas traders can only participate in futures trading for contracts from September 2018 and later, the exchange said in a circular, adding that international traders can use foreign exchange funds as deposits and it is only available in US dollars for now.
DCE will become the first domestic listed futures market to be extended to foreigners and four overseas brokerage agencies have completed the sign-up process so far.
The exchange will use the China Foreign Exchange Trading Center central parity yuan exchange rate as the benchmark for its market value. Taking into account exchange rate risks, it will convert the exchange rate at a discounted rate of 0.95.
“At present, many overseas mines that we have contacted have expressed an interest in participating in our iron ore futures market,” said Wang Fenghai, general manager at DCE, adding that the exchange’s international business rules such as the use of foreign currency as deposit and bonded futures delivery are also well suited to the needs of foreign companies that participate in iron ore futures trading.
“However, to attract more overseas mining companies to participate, the futures market in China still needs long-term cultivation,” he said.
Overseas banks are also interested in cooperating with DCE to become depository banks for the exchange in order to introduce more foreign traders to the Chinese market, leveraging their advantageous position and strong customer base, Wang added.
DCE aims to control risks associated with the program through comprehensive supervision, made up of risk management systems and mechanisms such as futures limit up and down levels, trading margin adjustments, fee management, forced liquidation, and abnormal transaction monitoring.