Dalian exchange says tighter rules curb excessive price swings

CHINA'S crackdown on commodity speculation has made local futures trading more stable than international markets, a top exchange official said, signalling initial success in Beijing's campaign to rein in food inflation.

During the exercise, China's three commodity exchanges - Shanghai, Dalian and Zhengzhou - tightened trading rules to limit speculation.

"From the viewpoint of Dalian Commodity Exchange operations, market moves and prices have reacted to government policy," Dalian Commodity Exchange vice-president Li Jun said on the sidelines of an industry conference in Kuala Lumpur yesterday. "Prices are fluctuating in a smaller range."

In December, China's commodity exchanges raised their margin requirements to force traders to back their positions with more cash. They also widened daily price move limits to allow markets to fluctuate without hitting headline grabbing up or down limits.

Price swings in Dalian's refined palm olein futures tended to be bigger compared to the benchmark Malaysian palm oil futures before the December measure. But this trend has since reversed. A February 24 sell-off in vegetable oil markets owing to concerns of an economic slowdown saw Malaysian palm oil tumble 5.1 per cent, compared to Dalian refined palm olein's 1.5 per cent decline.

Li declined to comment on media reports that Dalian could increase the lot size of its contracts to further curb speculation, saying it would enhance market surveillance and adhere to government policies.

Li said the exchange submitted a proposal to the government at the end of last year to launch the world's first metallurgical coke contract. "We are still waiting for approval from the China Securities Regulatory Commission, we hope it will be launched this year," he said.

Dalian was expected to launch the contract on December 15, according to exchange member sources, creating a new hedging tool for China - the world's No.1 steelmaker. The launch was supposed to meet increased hedging appetite from trading firms and private mills that use coke to produce steel. - Reuters

One Response to Dalian exchange says tighter rules curb excessive price swings

Leave a Reply