Shanghai Futures Exchange

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Shanghai Futures Exchange
SHFE.gif
Founded 1998
Headquarters Shanghai, PRC
Key People Liu Nengyuan, President & CEO; Wang Lihua, Chairman
Products Futures in copper, aluminum, natural rubber, fuel oil, crude, zinc and gold
Website http://www.shfe.com.cn/Ehome/index.html

The Shanghai Futures Exchange (SHFE) is one of the largest commodities markets in China. The exchange currently lists 14 futures contracts for trading, including copper, aluminum, zinc, lead, nickel, tin, gold, silver, steel rebar, steel wire rod, hot rolled coil, fuel oil, bitumen and natural rubber. the Shanghai International Energy Exchange, SHFE Business Services Co., Shanghai Futures Information Technology Co., Shanghai Futures and Derivatives Research Institute and Shanghai International Energy Exchange are the subsidiaries of SHFE. It is regulated by the China Securities Regulatory Commission (“CSRC”). [1]

SHFE was the first Chinese exchange to open futures trading to non-Chinese participants with the launch of the Shanghai International Energy Exchange in March 2018 with crude oil futures, after announcing plans to open its markets in October 2012. The exchange set up the International Energy Trading Center in the city's pilot free-trade zone (FTZ) in November 2013.[2] As of 2013, the commodity futures market was still off-limits for foreign investors.[3][4]

The exchange was ranked 10th among world derivatives exchange by the Futures Industry Association in 2018, with total volume of 1.2 billion contracts, down 11.9 percent from a year earlier.[5]

History

The SHFE was formed in 1998 as part of the restructuring of China’s futures industry, which was revived in 1990 after a 60-year hiatus, but saw the government close many of the 40-plus exchanges which emerged because of widespread price manipulation.

The Shanghai Futures Exchange was formed from the merger of the Shanghai Metal Exchange, Shanghai Cereals and Oil Exchange and Shanghai Commodity Exchange. It is one of three surviving entities alongside the the Zhengzhou Commodity Exchange and the Dalian Commodity Exchange, though a Shanghai-based financial derivatives exchange is being developed.

The Shanghai Futures Exchange was ranked the world's 14th largest derivative exchange by volume in 2011, down from 11th in 2010 and 10th in 2009. In 2011, it was second to the Zhengzhou Commodity Exchange, which ranked 11th globally, according to the annual Futures Industry Association's survey of the world's leading derivatives exchanges. [6]

In October 2013, Singapore Exchange (SGX) inked a memorandum of understanding (MoU) with the Shanghai Futures Exchange. The two exchanges will jointly explore cooperation in the development of derivatives for energy, metal, chemical and commodity indexes. [7]

In January of 2018, SHFE introduced a subsidiary, the Shanghai International Energy Exchange (INE), to trade domestic oil futures. The exchange had been in the works for years but encountered a number of delays.

Product Development

Trading started in May 1999, with futures in copper, aluminum and rubber, and the SHFE is now the premier metals exchange in Asia, competing with the London Metal Exchange, and offering benchmarks including aluminum and copper. However, its natural rubber contract has been the most heavily-traded in China in notional value terms since 2006, followed by its copper futures, whose volume tripled from 2006 to 2007.

A fuel oil future was added on Aug. 24, 2004, and the SHFE has been one of the most active campaigners for regulators to approve new commodity and financial products. While it has long sought to launch steel futures – despite industry resistance – it launched a zinc future on March 22, 2007, and received approval to start a SHFE gold futures contract, which it launched on Jan. 9, 2008.[8] Night trading in gold and silver futures began in May 2012.[9] Nickel, lead, crude oil, liquefied natural gas and coal have also been identified by exchange officials as areas of potential expansion.[10] The SHFE launched lead futures on March 24, 2011. [11]

The rubber contract accounted for 44 percent of total exchange turnover in 2006, 38 percent in 2007, and 32 percent in 2008, but the electronic exchange unveiled a new product innovation strategy focused on expansion in metals, energy and chemicals and received approval in 2007 to launch futures in gold, rapeseed oil and low-density polyethylene. However, in 2011, for agricultural futures markets, rubber futures trading was down 37.7% at Shanghai Futures Exchange.[12]

The SHFE also launched a steel wire rod futures contracts in March 2009.[13][14]

Following the official launch on March 27, 2009 one of the two types, SHFE steel rebar futures and steel wire rod futures, quickly developed into actively traded steel contracts. In 2009, SHFE reported that 32,314,9042 rebar futures contracts and 2,184,032 wire rod futures were traded on the exchange in the first nine months.[15]

In June 2014, The Financial Times reported that the exchange was planning to launch China's first nickel and tin futures contracts that year.

SHFE launched crude oil futures trading on March 26, 2018, through its subsidiary the Shanghai International Energy Exchange.[16] The long-awaited contract was the first renminbi-denominated crude oil derivative.

Structure and Regulation

All contracts are settled by physical delivery. Trading hours are from 9 a.m. 11:30 a.m. and 1:30 p.m. to 3 p.m. From December 20, 2013, SHFE extends the trading hours for industrial medals to night session from 9 p.m. to 1 a.m. The SHFE is a self-regulated, non-profit organization, overseen by the China Securities Regulatory Commission, with 219 members, including 183 brokerage firms. It also hosts more than 250 distant terminals.

Key People

Contracts Listed

Contract Volume

Shanghai Futures Exchange

Year Total Annual Volume* Percent Change
2018 1,201,898,093 (-)11.9%
2017 1,364,243,528 (-)18.8%
2015 1,050,494,146 24.7%
2014 842,294,223 31.1%
2013 642,473,980 68.6%
2012 365,329,379 (+) 18.5%
2011 308,239,140 (-) 50.4%
2010 621,898,215 (+) 43%
2009 434,864,068 --


Contract Volume

Shanghai International Energy Exchange

Year Total Annual Volume* Percent Change
2018 26,509,423
    • Shanghai International Energy Exchange was launched in March 2018.

References

  1. Overview. Shanghai Futures Exchange.
  2. China Advances Launch of Crude-Oil Futures. Wall Street Journal.
  3. China gets set to launch crude oil futures market. South China Morning Post.
  4. Shanghai to open up trading of commodities futures. South China Morning Post.
  5. 2018 Annual Volume Survey. Futures Industry.org.
  6. 2009 Annual Volume Survey. FIA magazine.
  7. SGX, Shanghai Futures Exchange agree on collaboration of commodity derivatives. Xinhua News.
  8. Press Release. SHFE.
  9. Shanghai Futures Exchange starts a silver futures trade. The Australian.
  10. Shanghai exchange plans silver futures. abcmoney.
  11. Shanghai exchange to start lead futures trading. Reuters.
  12. Annual Volume Survey. FIA.
  13. Shanghai to launch steel futures on Mar. 9 -brokers. Reuters.
  14. Shanghai exchange says to launch steel futures Friday. Thomson Reuters.
  15. Monthly Report. SHFE.
  16. China's first ever yuan oil futures begin trading in Shanghai. Bloomberg.