Big move in futures market! QFII and RQFII can participate in the expansion of financial derivatives trading varieties, and 41 futures options can attract gold.

Cailian News on September 2 (Reporter Zhou Xiaoya) China’s futures market has ushered in a new trend of opening to the outside world. Today, a number of domestic futures exchanges have announced notices about the participation of QFII and RQFII in the trading of some of their products, including 41 products.

Futures contracts for gold, silver, copper, aluminum, zinc, rebar and hot rolled coil under the previous issue, and options contracts for gold, copper, aluminum and zinc;

Crude oil, No.20 glue, low sulfur fuel oil, international copper futures contracts and crude oil option contracts under the Shanghai International Energy Exchange Center;

PTA, methanol, sugar, rapeseed oil and short fiber futures contracts under the Zhengshang Institute, and options contracts with PTA, methanol, sugar and rapeseed oil;

Futures and option contracts of soybean No.1, soybean No.2, soybean meal, soybean oil, palm oil, iron ore and linear low density polyethylene under the Dashang Institute;

Stock index options under CICC.

As early as last October, China Securities Regulatory Commission announced that QFII and RQFII can participate in financial derivatives trading, adding three new varieties: open commodity futures, commodity options and stock index options. The purpose of participating in stock index options trading is limited to hedging trading, which will take effect on November 1, 2021. With the announcement of relevant participating varieties by various futures exchanges, the aforementioned expansion of participating varieties officially landed, and the total number of participating varieties increased by 41, including 23 commodity futures varieties, 16 commodity options and 2 financial options.

On the same day, Fang Xinghai, vice chairman of the China Securities Regulatory Commission, delivered a speech at the China International Finance Annual Forum of the 2022 International Trade Fair, saying that the CSRC strengthened communication with international investors, timely transmitted policy information, and stabilized foreign investment expectations, and achieved good results. Foreign investment in China’s capital market shows obvious resilience.

Fang Xinghai said that it will continue to steadily push forward the all-round institutional opening of markets, institutions and products. These include steadily expanding the international varieties of commodities and financial futures, supporting the authorized cooperation of settlement prices of futures products, and diversifying the opening paths of futures markets. The Futures and Derivatives Law, which came into effect on August 1 this year, made clear institutional arrangements for accelerating the two-way opening of the futures market.

In addition, Fang Xinghai also said that the research supports Hong Kong to launch treasury bond futures, accelerate the opening of the domestic treasury bond futures market to the outside world, and realize the coordinated development of the two places.

QFII and RQFII can participate in the expansion of derivatives.

On September 2, the previous issue announced that with the consent of the China Securities Regulatory Commission, from now on, qualified foreign institutional investors and RMB qualified foreign institutional investors can participate in the trading of the following commodity futures and options contracts on the Shanghai Futures Exchange: first, gold, silver, copper, aluminum, zinc, rebar and hot rolled coil futures contracts; Second, gold, copper, aluminum and zinc option contracts.

At the same time, the Shanghai Energy Exchange Center, a subsidiary of the previous issue, announced that with the approval of the China Securities Regulatory Commission, qualified foreign institutional investors and RMB qualified foreign institutional investors can participate in the trading of commodity futures and options contracts in Shanghai International Energy Exchange Center from now on, including crude oil, No.20 glue, low-sulfur fuel oil, international copper futures contracts and crude oil options contracts.

Zhengshang Institute announced that starting from September 2, qualified foreign institutional investors and RMB qualified foreign institutional investors can participate in PTA futures and options contracts, methanol futures and options contracts, sugar futures and options contracts, rapeseed oil futures and options contracts, and short fiber futures contracts.

Dashang announced that from now on, qualified foreign institutional investors and RMB qualified foreign institutional investors can participate in the trading of commodity futures and options contracts under Dashang, including futures and options contracts of soybean No.1, soybean No.2, soybean meal, soybean oil, palm oil, iron ore and linear low-density polyethylene.

As for the specific matters related to participation, the above commodity futures exchanges and their subsidiaries mentioned that banks with the qualifications for the futures margin depository business of domestic customers of various commodity futures exchanges can directly engage in the futures margin depository business of qualified foreign investors.

In addition, if a futures company accepts the entrustment of qualified foreign investors to trade commodity futures and options contracts in various commodity futures exchanges, it shall handle the account opening procedures for qualified foreign investors in accordance with the Provisions on the Administration of Customer Account Opening in Futures Market and the Operational Guidelines for Unified Account Opening for Special Unit Customers of China Futures Market Monitoring Center, and strictly follow the Announcement on Qualified Foreign Institutional Investors and RMB Qualified Foreign Institutional Investors Participating in Commodity Futures and Options Contracts and other relevant requirements to manage the trading authority of customers.

For qualified foreign investors to engage in the variety trading under the appropriateness system, members of the futures company shall strictly implement the relevant guidelines, implementation methods and other requirements, and do a good job in the management of the appropriateness of qualified foreign investors. Futures companies are requested to do a good job in the management of trading authority and interpretation of rules, fully remind qualified foreign investors of matters needing attention and risks related to trading, settlement and delivery, and guide qualified foreign investors to participate in commodity futures and option contract transactions in an orderly manner.

In addition, all relevant units need to make preparations for qualified foreign investors to participate in the trading of commodity futures and options contracts, strengthen risk prevention and control, and ensure the smooth operation of the market.

As for financial derivatives, on September 2, CICC issued a notice saying that since the date of the notice, CICC began to accept applications for qualified foreign investors to participate in stock index option trading.

CICC emphasizes that qualified foreign investors should abide by laws, administrative regulations, rules, business rules of exchanges and other relevant provisions when participating in stock index options trading, and the purpose of participating in stock index options trading is limited to hedging transactions. In addition, CICC also stated that members entrusted by qualified foreign investors should be diligent and conscientious, and strengthen the compliance management of the trading behavior of qualified foreign investors.

Deepening internationalization of China’s derivatives market

In March 2018, China’s first specific variety of crude oil futures opened to the outside world was successfully listed in the previous energy period. At that time, Jacky Jiang, member of Chinese People’s Political Consultative Conference and former vice chairman of CSRC, said that the futures would be a pathfinder for commodity futures to open to the outside world. The homogeneity of commodities, the free trade in spot market and the application of "law of one price" in bulk commodity trade determine that the commodity futures market has the natural attributes of internationalization and globalization, so it is more urgent to open to the outside world.

The accumulated experience of crude oil futures in open path, tax management, foreign exchange management, bonded delivery and cross-border supervision and cooperation can be gradually extended to other mature commodity futures such as iron ore and non-ferrous metals, thus promoting the full opening of China’s commodity futures market.

Subsequently, China’s futures market opened the road to the expansion of international varieties. Up to now, the number of international varieties of commodity futures options in China has increased to 9. Among them, Shanghai International Energy Trading Center, as the first international variety trading center in the whole market, has listed five international varieties, namely crude oil futures and options, No.20 rubber futures, low sulfur fuel oil futures and international copper futures.

PTA futures under Zhengshang Institute, as the first specific chemical product in China, was successfully introduced to overseas traders in December 2018. Since 2018, iron ore futures, palm oil futures and options under the Dashang Institute have successively implemented the business of introducing overseas traders.

The participation of QFII and RQFII in China’s futures and options markets can be traced back to 2011 at the earliest. On May 4th, 2011, China Securities Regulatory Commission issued the Guidelines for Qualified Foreign Institutional Investors to Participate in Stock Index Futures Trading (hereinafter referred to as the Trading Guidelines), and then qualified foreign institutional investors and RMB qualified foreign institutional investors (hereinafter referred to as qualified foreign investors) gradually and orderly participated in stock index futures trading.

Until mid-October last year, the People’s Bank of China, the Foreign Exchange Bureau and the China Securities Regulatory Commission announced that qualified foreign investors could participate in the trading of financial derivatives, adding three kinds of open commodity futures, commodity options and stock index options, and the purpose of participating in the trading of stock index options was limited to hedging transactions, which took effect on November 1, 2021.

Fang Xinghai: Steadily promote the all-round institutional opening of markets, institutions and products.

As QFII and RQFII can participate in the range of financial derivatives trading, the promotion of two-way opening of the capital market is also worthy of continuous attention.

On September 2nd, Fang Xinghai, Vice Chairman of China Securities Regulatory Commission, delivered a speech at the China International Finance Annual Forum of the 2022 International Trade Fair, saying that the CSRC strengthened communication with international investors, timely transmitted policy information, and stabilized foreign investment expectations, and achieved good results. Foreign investment in China’s capital market shows obvious resilience.

In terms of futures, as of August 26th, the customer rights and interests of foreign investors in the stock index futures market were 31.755 billion yuan, and the total customer rights and interests in crude oil futures, iron ore futures, PTA futures, No.20 glue, palm oil, international copper and low sulfur fuel oil futures markets were 21.297 billion yuan.

Fang Xinghai said that it will continue to steadily push forward the all-round institutional opening of markets, institutions and products. These include steadily expanding the international varieties of commodities and financial futures, supporting the authorized cooperation of settlement prices of futures products, and diversifying the opening paths of futures markets.

In addition, it will further strengthen the construction of regulatory capacity and risk prevention capacity in an open environment. Continue to strengthen communication with overseas institutional investors, continuously improve the convenience of A-share investment, and continuously enhance the confidence of foreign investors in investing in China’s capital market.

It is worth mentioning that Fang Xinghai indicated that it will further strengthen the pragmatic cooperation between the mainland and Hong Kong capital markets. In the next step, we will launch the following three new measures with Hong Kong and relevant departments to expand pragmatic cooperation in the capital markets of the two places: First, we will expand the Shanghai-Shenzhen-Hong Kong Stock Connect. Promote the inclusion of qualified shares of major foreign companies listed in Hong Kong and more listed companies in Shanghai and Shenzhen into the target scope. Second, support Hong Kong to launch RMB stock trading counters. Study on adding RMB stock trading counters in Hong Kong Stock Connect to help RMB internationalization. Third, support Hong Kong to launch treasury bonds futures. The research supports Hong Kong to launch treasury bond futures, accelerate the opening of the domestic treasury bond futures market to the outside world, and realize the coordinated development of the two places.

This article comes from Zhou Xiaoya, a reporter from Cailian Association.