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The Dalian Commodity Exchange is planning to introduce soy oil futures and soybean options and is studying treasury bond futures, a senior exchange official said yesterday.
"We have been preparing for the launch of soy oil futures for a long time and the product design is quite mature. We will choose to launch it at an appropriate time," Zhu Yuchen, president of the exchange, told a briefing yesterday in Beijing.
He said the exchange - one of three in China - is also actively working on the design of rice futures as well as futures options for soybeans and corn. And it has been approved by the China Securities Regulatory Commission to conduct a joint research project with the Ministry of Finance on treasury bond futures.
"Our research team is drawing upon overseas experience on treasury bond futures and regularly exchanges information with overseas exchanges. How to avoid repeating past errors is also a major concern," said Zhu.
Trading in treasury bond futures was halted in 1995 following a slew of trading scandals and irregularities.
Since then, the authorities have adopted a prudent approach towards the development of such financial derivatives.
Zhu said the launch of treasury bond futures may require more preparation compared with other commodity futures and it also has to proceed in line with China's interest rate liberalization.
So far, all the new products launched by the exchange require regulatory approval and the exchange is unsure of the timetable, he said.
It launched corn futures last September, and the No 2 soybeans contract in December.
Having a richer product line, especially for soybean products and other agricultural goods, is a major target for the exchange, which located in Dalian in Northeast China's Liaoning Province close to many major agricultural areas in the region.
Zhu said that the exchange will not accelerate the launch of new products but gradually try to improve the contract design.
And apart from agricultural products, the exchange is also interested in oil and steel futures.
China's fast-growing economy has increased the country's demand for many raw materials and purchases from Chinese enterprises, directly affecting the prices of relevant commodities in the global markets.
However, China's underdeveloped futures market and the lack of a risk-hedging consciousness among domestic enterprises have made them vulnerable to international price fluctuations.
Zhu said China badly needs to develop the futures market and relevant risk control mechanisms in order to gain a greater influence in price-formation in international markets.
That also requires legislative efforts. Zhu said it is time to amend the provisional regulation on futures trading management enacted by the State Council in 1999.
(China Daily March 11, 2005)
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