The hottest iron ore futures fired the first shot

2022-07-24
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Iron ore futures fired the first shot at the internationalization of China's futures market

on February 2, China Securities Regulatory Commission held a press conference to approve the iron ore futures of Dachang exchange as a specific variety and allow the introduction of overseas traders, marking the official "countdown" of China's iron ore futures opening to the outside world

previously, at the 2018 working meeting of the CSRC system, the CSRC listed guiding the healthy development of futures and derivatives markets as one of its main tasks in 2018. In the field of futures and derivatives, the CSRC said that it would steadily launch crude oil futures, start with iron ore futures, orderly introduce foreign investors, steadily develop financial futures and options such as stock indexes and treasury bonds, and promote the participation of commercial banks, insurance companies and qualified foreign institutions in the Treasury bond market

the relevant person in charge of Dachang exchange said that the internationalization of iron ore futures adheres to the purpose of "based on China and serving the world". The opening of iron ore futures to the outside world will enable domestic and foreign traders to compete on the same platform, thus forming an internationally recognized, open and transparent futures price benchmark, making the futures price signal more authoritative and influential, serving the real economy in depth, and helping the development of global iron ore trade

accelerating the pace of introducing foreign traders into China's market is an important part of the internationalization of China's futures market. However, it is slightly different from the expectation. Previously, the industry generally believed that crude oil futures would be the first international variety in the domestic futures market. However, from the current progress, the listing of crude oil futures is still pending, and the field of iron ore futures is the first to break through

as an important international bulk commodity, iron ore futures have a good foundation for internationalization. In 2016, China's iron ore imports reached 1.024 billion tons, accounting for about 70% of the global iron ore trade. China has become the largest international iron ore spot market in the world. It is necessary to develop an international iron ore futures market to improve the pricing mechanism and better serve the spot market

at the same time, the establishment of an iron ore pricing center dominated by futures can bring together more market elements such as spot goods, trade funds, market participants and industry information, and provide open, transparent and reasonable price reference for enterprises in the whole industry chain at home and abroad

it is understood that China's iron ore futures have the foundation to open up to the outside world and become the pricing benchmark of international trade. In 2017, China imported 1.075 billion tons of iron ore, accounting for about 68% of the global iron ore trade. Since the listing of iron ore futures on the Dachang exchange on october18,2013, it has been running smoothly and trading actively, and has developed into the world's largest iron ore derivatives market. In 2017, the unilateral trading volume of China's iron ore futures was 329million, and the average daily position of corporate customers accounted for 37%. The futures function played well, and nearly 100 steel mills and nearly 1000 steel traders participated in iron ore futures trading

iron ore futures are priced and settled in RMB and delivered in kind. The futures and spot markets are closely connected. The futures prices are highly representative, and the correlation between futures and spot prices reaches 0.95. However, due to the fact that overseas traders cannot directly participate in the trading of China's iron ore futures, the international influence of their prices is limited

in recent years, in accordance with the principle of "self orientation, controllable risk, from easy to difficult, and step by step", the big commercial exchange has developed an iron ore futures internationalization scheme with RMB pricing, foreign currency as margin, bonded delivery, and overseas customers and institutions entering the market through domestic members. The original contract and basic system remain unchanged, and the core technology system, clearing and risk control mode remain unchanged. Therefore, there are no substantive obstacles in terms of systems, rules and technologies, which can solve the problems of cross-border capital transfer and exchange, and the bonded delivery system has been implemented, so overseas traders can smoothly participate in physical delivery

the person in charge pointed out that it is of great significance for China to introduce iron ore futures into overseas traders. First, as the first listed futures variety introduced into overseas traders in China, the internationalization of iron ore futures means that institutional customers such as foreign mines can directly participate in China's commodity futures market. The price of iron ore futures will truly become an internationally representative and credible price generated by the joint trading of global participants, and can more accurately reflect the supply and demand changes and macroeconomic impact of global iron ore trade, so as to build a fair A fair and transparent pricing benchmark for international iron ore trade

second, introduce overseas traders, pool global resources, build global markets, and better serve global investors. As the largest importer of iron ore, China has built an international futures trading market for iron ore at home to attract global investors to enter the market, which will make the investor structure more perfect and the information collection more sufficient, help guide the circulation and allocation of iron ore mining, trade and related capital around the world, help improve the hedging efficiency of relevant global enterprises, and promote the development of the global iron ore industry

thirdly, the internationalization of iron ore futures is an important part of China's capital market opening to the outside world, which will help build a capital market with Chinese characteristics with international competitiveness. At present, as the second largest economy in the world, China's real economy has been highly integrated into global economic integration. It is our duty and responsibility to promote the opening of the futures market, actively participate in global economic governance, deeply participate in the formation of global commodity prices, and promote the establishment of a more just and reasonable new international trade order

The person in charge said that the introduction of iron ore futures into overseas traders means that the big commercial exchange has taken a substantial step from "single closed" to "multi open", and it is also the key to promote the strategic transformation of "building a world-class derivatives exchange". Taking the opening up of iron ore futures as an opportunity, Dachang exchange will promote reform through opening up, effectively change the working concept and methods of the "single closed" futures market formed for a long time, strengthen the working concept of "multiple opening", innovate working methods, strengthen internal management, improve risk prevention ability, further enhance international competitiveness, promote the construction of a more competitive capital market, and better serve the real economy, Serving the national strategy

the pricing of iron ore once touched the hearts of millions of people. Experts said that the global iron ore trade pricing model is in a critical period of transformation and upgrading. As an important raw material in the iron and steel industry, iron ore has experienced spot pricing and long-term association pricing, and after 2010, a fixed price method dominated by the Platts' index has been formed, i.e. the stop key is pressed quickly. The Platts index is not the price traded by investors, but the evaluation value obtained through inquiry, which is not open and transparent. The huge trade scale of the iron ore market does not match the pricing model, and there is an urgent need to establish a recognized global iron ore pricing benchmark

through internal technological innovation and mergers and acquisitions of other enterprises

"Dashang iron ore futures provides an ideal forward market for foreign mines." A former head of sales in China of a large multinational trading enterprise told me in an interview. It is understood that in 2017, the unilateral trading volume of iron ore futures of Dashang exchange was 329million, far exceeding that of similar foreign markets, with a certain thickness and depth. The average daily position of corporate customers accounts for 37%. Nearly 100 steel mills and nearly 1000 steel traders participate in iron ore futures trading, and the investor structure is becoming more and more reasonable. While providing good liquidity for participants, the price of iron ore futures of Dashang exchange also well reflects the supply-demand relationship of the industry due to the active participation of domestic industrial customers

it is learned that many foreign steel enterprises and traders hope to participate in China's iron ore futures trading. Previously, at the international futures conference held in Shenzhen, the CEO of a trading enterprise under a Bolivian mining enterprise introduced that the company is very concerned about the development of China's futures market and will actively participate in the iron ore futures trading of the big commercial exchange. The company's existing minerals meet the delivery standards of the Dachang exchange, and hopes to carry out cooperation in setting up overseas delivery warehouses in the future, so as to further expand the Chinese market

in addition, the active participation of domestic mines, traders, steel mills, and black commodity related enterprises in the iron ore futures of Dachang exchange also provides a basis for foreign enterprises to participate in it in the future, build their own complete industrial risk management system, and carry out relevant risk business with Chinese enterprises and financial institutions

foreign mining and other entity enterprises can realize global industrial chain risk management through iron ore futures of large commercial exchanges, while foreign financial institutions can hedge China's macroeconomic cycle through iron ore futures

iron ore futures have become a "barometer" of China's real estate and infrastructure investment to a certain extent. After the introduction of overseas traders, their prices will be representative of the whole industry, and the price discovery function will be more effective. Relevant experts said that after China's iron ore futures successfully introduced foreign participants, relevant institutions will develop relevant index funds and ETF funds to facilitate the participation of foreign institutions and investors

at present, the scheme and rules for the introduction of iron ore futures into overseas traders of the Dachang exchange have been clarified, and the technical system upgrading and transformation and various business preparations have been ready. The big commercial exchange is stepping up to improve relevant preparations. Recently, it will solicit public opinions from the market on the rules for introducing iron ore futures into overseas traders. The official said that after the introduction of iron ore futures to overseas traders, the big commercial exchange will strengthen supervision, maintain the stable operation of the market, and provide a fair, open and just trading environment for global traders. He also suggested that overseas traders interested in participating in China's iron ore futures should familiarize themselves with the trading rules as soon as possible, and make good preparations for trading and arrangement of risk control measures

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