China to ramp up derivative market products, says regulator

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Updated: December 19, 2020 6:54 PM

Fang Xinghai, vice chairman of the China Securities Regulatory Commission, told a forum in Shenzhen that a planned expansion of China’s capital markets would require a more sophisticated financial derivatives market.

china share market shanghai stock exchangeShanghai Petroleum and Natural Gas Exchange said over the weekend that it has launched an innovative business model that allows group purchases for liquefied natural gas (LNG) tenders. (Representational image)

China will accelerate the rollout of new commodity futures and options including natural gas, refined oil and peanuts as it sets out to develop its derivatives market amid increasing demand, a senior securities regulator said on Saturday.

Fang Xinghai, vice chairman of the China Securities Regulatory Commission, told a forum in Shenzhen that a planned expansion of China’s capital markets would require a more sophisticated financial derivatives market.

“Currently, China’s financial futures and options market is at an early stage of development,” Fang said in a speech published by the China Futures Association.

“It far lags market participants’ growing needs to manage their risks. It also fails to keep pace with China’s economic development and financial reforms.”

But growth in the commodities futures market is “encouraging”, he added.

China this year launched 12 new commodity derivative products.

Total futures trading turnover jumped 46% during the first 11 months of 2020 to 382.5 trillion yuan ($58.53 trillion), fueled by rising risk-hedging needs due to the coronavirus.

Institutional holdings in the commodities market jumped by 38%, Fang added.

Hog futures will be launched on January 8, and China will also look into carbon futures to help Beijing meet its pledge to become carbon neutral by 2060, he said.

Addressing the same forum, Zhengzhou Futures Exchange chairman Lu Dongsheng said his exchange would “make every effort” to prepare for the launch of a wide range of new futures products, including peanuts, chicken, steel billet, caustic soda and paraxylene.

Zhengzhou would also deepen research and development into new futures such as potatoes, sunflower seeds, garlic, cement and propylene, he added.

Separately, the Shanghai Petroleum and Natural Gas Exchange said over the weekend that it has launched an innovative business model that allows group purchases for liquefied natural gas (LNG) tenders.

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