One week countdown to the internationalization of iron ore Futures: the big business exchange welcomed customers and optimized the global pricing system in May
on May 4, the iron ore futures of the big business exchange will introduce foreign traders. International institutions, including JPMorgan Chase, S & P global Platts, and even iron ore giants such as vale, have expressed great concern about this matter. As S & P global Platts said in an interview, "the internationalization of China's iron ore futures is an exciting milestone."One week after welcoming guests in May, the iron ore futures of Dalian Commodity Exchange (hereinafter referred to as "Dachang exchange") will be officially introduced to overseas traders on May 4. This is the second futures variety that has taken international steps after China launched crude oil futures settled in RMB at the end of March
on February 2 this year, the CSRC issued a notice formally approving iron ore futures as a specific domestic variety and allowing the introduction of overseas traders. On March 27, the Dachang Exchange announced the relevant rules for the introduction of iron ore futures into overseas traders
as the world's largest steel producer, China has been the world's largest consumer and importer of iron ore for many years. In 2017, China imported 1.075 billion tons of iron ore, accounting for more than 75% of the global seaborne iron ore trade. Although domestic iron ore futures have been listed in the big commercial exchange since 2013, China has been lack of influence matching its consumption status in iron ore trade
unlike international commodity markets such as crude oil and metals, iron ore trade has not yet formed a globally credible iron ore price benchmark. In the current iron ore pricing system, which is recognized by customers and widely used, Platts index is more influential. However, since the Platts index entered the iron ore market in 2008, the problems shown by this index in the pricing process, such as small inquiry samples, opaque pricing process, and "rising fast and falling slowly" have been criticized by domestic steel enterprises
Cao Zhiqiang, chairman of Hunan Valin Iron and Steel Group, submitted a proposal to optimize the pricing mechanism of iron ore trade at the national two sessions this year. "There are loopholes in the compilation method of Platts index, with few samples and weak representativeness, resulting in the deviation of its price trend from the real market, showing the characteristics of rapid rise and slow fall, which has brought many negative effects to the industry and is not conducive to the smooth development of international trade."
the iron ore futures platform of Dachang exchange, which will be opened to overseas traders in May, is expected to change this situation
Wang Fenghai, general manager of the big commercial exchange, pointed out in an interview with the media at the end of March: "since its listing in 2013, the scale of the domestic iron ore futures market has steadily increased, and the main performance of production is: each load can only reach a certain load. Customers in the industry actively participate. So far, not only the conditions for the internationalization of iron ore futures have been mature, but also China's iron ore futures have the advantage of becoming the pricing benchmark of global iron ore trade."
according to the data of Dachang exchange, in 2017, the unilateral trading volume of iron ore futures of Dachang exchange was 329million, which has become the largest iron ore derivatives market in the world; Last year, the average daily position of legal customers of iron ore futures of the big commercial exchange reached 37%, and nearly a thousand customers participated in the industry. Seven of the top 10 domestic steel enterprises participated in the transaction, and the production capacity accounted for 35% of the total national steel production capacity
the head of the marketing department of a large domestic steel enterprise pointed out to the 21st Century Business Herald on the afternoon of the 24th that after years of development, the iron ore futures of Dashang has a large enough scale and enough participants, "now it is natural to promote internationalization". For steel enterprises, the further opening of the iron ore futures market is conducive to better play its function of price discovery, and steel enterprises can better use this platform to hedge and spread risks
it is understood that up to now, relevant supporting policies and measures for the internationalization of domestic iron ore futures have been issued one after another. In terms of technical system, the exchange side technical system has fully supported international business. At the end of March, the members of futures companies and depository banks completed the upgrading of all exchange conversion systems, and the relevant system platforms passed two rounds of joint market wide tests. The test process was smooth and the business verification was correct
in terms of account opening, since the issuance of international business rules on March 27, as of April 20, the control system of plastic granulator, including heating system, cooling system and process parameter measurement system, has passed the suitability test of iron ore futures traders for more than 12 times, and 15 overseas brokerage institutions have completed the filing in the big business office. Previously, the exchange also announced 10 foreign currency depository banks. "At present, everything is ready, only waiting for the east wind in May." Wang Fenghai said
mining giants are eager to try
on March 27, the big commercial exchange released more than 10 rules related to the introduction of iron ore futures into overseas traders. Among them, the biggest highlight is that the settlement is priced in RMB. Overseas traders participate through domestic futures members and overseas brokerage institutions. The use of overseas funds is managed with reference to specific varieties, and the physical delivery of overseas traders is solved through the bonded delivery system
on April 16, Dachang Exchange issued a notice specifying the implementation time of introducing iron ore futures into the business of overseas traders, trading contracts, categories of foreign exchange funds as guaranteed gold coins, benchmark prices and conversion methods, as well as the implementation time of rules related to bonded delivery
according to the notice, overseas traders who have passed the appropriateness review of traders and completed the account opening can participate in the iron ore futures trading of Dachang exchange from 9:00 on May 4, 2018, Beijing time. Iron ore futures were normally traded at night on the evening of May 3, and there was no call auction at the beginning of the first quarter of the day on May 4. In terms of contracts, overseas traders can participate in iron ore futures 1809, 1810, 1811, 1812 and later listed contracts
the news that domestic iron ore futures have been introduced into overseas traders has attracted great attention from overseas industrial customers and international financial institutions
Wei Hongbin, CEO of JPMorgan Chase Futures Co., Ltd., told 21st Century Business Herald on the afternoon of the 24th that after the news that the big commercial exchange introduced foreign traders on May 4 came out, foreign traders and financial institutions were highly concerned. Institutions focus on three areas, including cross-border payment of foreign exchange funds, bonded delivery and settlement
"as we can see, the internationalization of China's futures market is accelerating. We believe that futures open to foreign traders in the future will expand to more varieties besides crude oil and iron ore." Wei Hongbin said
Paul Ruston, head of Cargill's global iron ore business, also told 21st Century Business Herald: "Most international mining and trading enterprises welcome the internationalization of iron ore steel window inspection rules GB 5827 (6) futures, and will gradually participate in the open iron ore futures market, using futures tools to guide and serve spot trade. At the same time, the opening of iron ore futures to the outside world will provide a new pricing model for international trade, and international mining and other industrial customers have considered forming a more representative futures price by participating in China's futures trading To guide pricing. "
the head of a trading company under a Bolivian mine also said in an interview recently that the company's existing iron ore varieties meet the delivery quality standards of Dachang exchange. In the future, it will actively participate in the iron ore futures trading of Dachang exchange, and hopes to become an overseas iron ore delivery warehouse of Dachang exchange to further expand the Chinese market
and the international mining giants are also showing a positive attitude. Due to the high concentration of production in the iron ore industry, BHP Billiton, Rio Tinto, vale and FMG, the four mining giants, control more than 70% of the seaborne iron ore market
Shi Huaze, CEO of vale, the world's largest iron ore producer, said in an exclusive interview with 21st Century Business Herald in Beijing at the end of March this year: "the further internationalization and opening up of China's futures market have a positive impact on the market." Vale also replied to the 21st Century Business Herald on the 24th by email, stressing that the company supports all measures that are conducive to the development of China's steel industry and the transparency of the pricing mechanism, so that it can truthfully reflect market demand
overseas institutions pay attention to the delivery rules
according to the big commercial exchange, in the early stage of the internationalization of iron ore futures, bonded delivery business was only carried out in Dalian port, and will gradually expand to other ports in the future
in order to dispel the doubt that overseas traders may receive duty paid warehouse receipts when participating in the delivery as buyers, the big commercial exchange has also set up an innovative service of "warehouse receipt replacement" in the rules of this scheme. Specifically, the essence of registering bonded warehouse receipts through warehouse receipt service providers and replacing tax paid warehouse receipts with domestic delivery sellers is two warehouse receipt transfers, that is, domestic delivery sellers transfer tax paid warehouse receipts to warehouse receipt service providers, and warehouse receipt service providers transfer bonded warehouse receipts to domestic sellers. The delivery seller shall hold the bonded warehouse receipt after replacement and deliver it to the overseas buyer in pairs, so as to solve the problem that the overseas buyer is difficult to deal with after receiving the duty paid warehouse receipt
in terms of the use of foreign exchange funds, overseas traders can use foreign exchange funds as margin. At present, the foreign exchange currency available for margin is US dollars. In terms of foreign exchange accounting, the central parity rate of the current day's RMB exchange rate published by the China foreign exchange trading center is used as the benchmark price for the verification of its market value, and it is translated at a certain discount rate. Considering the risk of exchange rate fluctuations, the discount rate stipulated by Dashang is 0.95
Wang Fenghai summed up the significance of the internationalization of iron ore futures in the interview, saying that China has a large amount of iron ore imports and a high degree of external dependence. By introducing overseas traders, especially international mining and other industrial customers, it will help to improve the structure of China's iron ore futures traders, make the iron ore futures price truly become the price with international influence generated by the common trading of global participants, more accurately reflect the changes in supply and demand of the macro economy and global iron ore trade, and provide an open basis for the international trade of iron ore to adopt the basis trade model common to bulk commodities Transparent and perfect pricing benchmark
"at present, the world's top ten iron ore traders participate in iron ore futures trading through companies registered in China. After the internationalization is implemented, it is believed that overseas traders will more actively participate in China's iron ore futures trading." Wang Fenghai said
in an interview with 21st Century Business Herald on the 24th, S & P global Platts said, "the internationalization of China's iron ore futures is an exciting milestone. Unlike other overseas derivatives and the Platts index, which dominates spot pricing, China's iron ore futures have better liquidity, and the development of international business makes it easier for international institutions and companies to participate."