DCE

Iron Ore InternationalizationIron Ore Internationalization 中文

Hedging Trading Operation Instructions (Version of September 2014)

- = +

I. Answers to Main Questions of Hedging Trading

(1) How does a client participate in the hedging trading?

The client shall firstly file an application for the hedging trading qualification to the Exchange through a futures company member. After the hedging qualification is approved, the client may start the hedging trading. The hedging client whose position limit is insufficient may file an application to the Exchange for increasing the hedging amount.

As of July 29, 2013, the futures company member shall handle the hedging business for the clients through the member service system. The client-related materials will be kept at the member, while the photocopy of the Business License used for applying for the qualification must be facsimiled or emailed to the Exchange (Please refer to the attachment for the contact information).

(2) What clients may apply for being a hedging client?

The client which applies for the hedging qualification must satisfy two prerequisites: (I) The client is an entity client; and (ii) the client has the qualification of production and operation of the relevant products or the qualification of being a special legal person or of assets management accounts or any other wealth management accounts, or the client is one of the risk management subsidiaries of the futures company. The Exchange will make judgment on the basis of the business scope described in the client's Business License; and the products described therein and the related products may be used for application. For example, the client who engages in the soybean planting, processing and/or trading may apply for the hedging qualification of the soybean, and the client who engages in fish meal may apply for the hedging qualification of the soybean meal product.

(3) How to obtain a hedging qualification?

After obtaining the client's consent, the futures company member may handle, on behalf of the client, the declaration formalities at the Exchange pursuant to these Measures; and the non-futures company member may directly handle the declaration formalities at the Exchange.

(4) When no hedging increase is approved, what is the hedging client's position limit? Why position excess occurs?

When no hedging increase is approved, the hedging client's position limit is equal to that of the speculative client, that is, the sum of the speculative position and the hedging position shall not exceed the limit of the speculative position. Then, the position limitation requirements for the client are: (i) the speculative position shall not exceed the limit of the speculative position; (ii) the hedging position shall not exceed the limit of the speculative position; and (iii) the consolidated position of speculation and hedging shall not exceed the limit of the speculative position.

When no hedging increase is approved, the position excess occurs under any of the following circumstances: (i) the hedging client's speculative position exceeds the limit of the speculative position; (ii) the hedging position exceeds the limit of the speculative position; or (iii) the consolidated position of speculation and hedging exceeds the limit of the speculative position.

(5) After the hedging increase is approved, what is the hedging client's position limit?

After the hedging increase is approved, the hedging client's position limit shall be the sum of the limit of the speculative position and the hedging increase. Then, the position limitation requirements for the client are: (i) the speculative position shall not exceed the sum of the limit of the speculative position and the hedging increase; (ii) the hedging position shall not exceed the sum of the limit of the speculative position and the hedging increase; and (iii) the sum of the speculation and hedging positions shall not exceed the sum of the limit of the speculative position and the hedging increase.

After the hedging increase is approved, the position excess occurs under any of the following circumstances: (i) the hedging client's speculative position exceeds the limit of the speculative position; (ii) the hedging position exceeds the sum of the limit of the speculative position and the hedging increase; or (iii) the sum of the speculation and hedging positions exceeds the sum of the limit of the speculative position and the hedging increase.

(6) How to differentiate the general month and the delivery month?

The hedging of the general month refers to the period from the date of the contract listing through the last trading day of the first month immediately preceding the delivery month. The hedging of the delivery month refers to the period from the first trading day of the delivery month through the last trading day thereof.

(7) What day is the deadline for applying for increasing the hedging position amount of the general month?

The non-futures company member and/or the client may apply for increase of the hedging position amount of the general month prior to the last trading day of the second month immediately preceding the delivery month of the hedging contract.

(8) What day is the deadline for applying for increasing the hedging position amount of the delivery month?

The non-futures company member and/or the client may apply for increase of the hedging position amount of the delivery month prior to the last trading day of the first month immediately preceding the delivery month of the hedging contract.

(9) What period is the effective term for opening a position with respect to the hedging increase of the general month?

The non-futures company member and/or the client may open a hedging position on its own during the period from the date of approving the hedging increase of the general month through the last trading day of the month immediately preceding the delivery month.

(10) What period is the effective term for opening a position with respect to the hedging increase of the delivery month?

With respect to the approved hedging increase of the delivery month, the non-futures company member and/or the client may open a hedging position on its own during the period from the first trading day of the delivery month through the last trading day thereof.

(11) Is there any restriction on the repeated use of the hedging amount?

There is no restriction on the repeated use of the hedging amount during its effective term, that is, after the liquidation of the hedging position, the non-futures company member and/or the client may still continue to open a hedging position within the hedging amount.

(12) What are the principles for approving the hedging position increase of the general month?

With respect to the application for the hedging increase of the general month filed by the non-futures company member or the client, the Exchange will carry out the approval on the basis of the overall consideration of the client's hedging demands, the contract positions and other factors.

When a certain contract is in the proportional position limitation phase, the maximum quantity used for opening a position (inclusive of the limit of the speculative position and the hedging increase of the general month approved by the Exchange) with respect to such contract for any single client (the accounts of the actually controlling relationship will be deemed to be a client) shall not exceed twenty-five (25) percent of the unilateral position of such contract.

When a certain contract is in the absolute position limitation phase, the maximum quantity used for opening a position (inclusive of the limit of the speculative position and the hedging increase of the general month approved by the Exchange) with respect to such contract for any single client (the accounts of the actually controlling relationship will be deemed to be a client) shall not exceed two point five times the limit of the client's speculative position.

After the non-futures company member and/or the client obtains the hedging increase of the general month, in case of any change to the market position, the non-futures company member and/or the client shall adjust their/its position in good time under such principles.

(13) What are the principles for approving the hedging position increase of the delivery month?

When the hedging position of the non-futures company member and the client is in the delivery month, the Exchange will transform it into the hedging position increase subject to the lesser of the quantity of the hedging position of the general month and the limit of the speculative position of the delivery month with respect o the relevant product. In case the non-futures company member's or the client's position amount of the delivery month indeed cannot satisfy its hedging demands, the Exchange will carry out the approval under the principle of strictly controlling risks and on the basis of the overall consideration of the client's demands and the futures and physicals market operation.

(14) Upon transformation from the general month to the delivery month, how much hedging increase of the delivery month will the hedging client automatically obtain?

When the hedging position of the non-futures company member and the client is in the delivery month, the Exchange will transform it into the hedging position increase subject to the lesser of the quantity of the hedging position of the general month and the limit of the speculative position of the delivery month with respect o the relevant product. For example, a client has the approved 1,000 contracts of the hedging amount during the general month, the client has 800 contracts of the hedging position on the last trading day of the first month immediately preceding the delivery month, and the client's position limit in the delivery month is 300 contracts, then the automatically approved hedging increase of the delivery month will be min [800,300] = 300 contracts. The hedging client's position of the delivery month may be up to 600 contracts (300 contracts being the automatically approved hedging increase and 300 contracts being the limit of the speculative position).

(15) Will the Exchange make the reply within five (5) trading days after the member submits the application materials on behalf of the client?

No. The Exchange will firstly examine the completeness and accuracy of the materials after it receives the member's application. If the materials are complete, the reply will be made within five (5) trading days; or if more materials need to be submitted, the Exchange will firstly contact the member to re-submit the relevant materials. With respect to the application for increasing the hedging amount of the delivery month, the Exchange will, after receipt of the complete application materials, examine the materials from the first trading day of the first month immediately preceding the delivery month of the contract and make the reply within five (5) trading days.

(16) What contents of the application materials should the member specially examine?

The member shall specially confirm whether both the client's contact person and person-in-charge have the applicable qualification of holding office and confirm whether that hedging application is the client's true declaration of will. In addition, the member shall guide the client how to fill in the application materials under the Exchange's approval principles and on the basis of the client's operation.

(17) How to fill in the client's contact person and the member's contact in the application materials?

For the purpose of avoiding any improper disclosure of the client's information, the client's contact person should be the person-in-charge of managing the hedging trading of the futures positions of the enterprise, and the member's contact person shall be the person-in-charge of managing the hedging application business.

(18) How long is the effective term of the approved hedging trading qualification obtained by the client?

Currently, the Exchange does not prescribe the effective term of the approved hedging trading qualification obtained by the client. The non-futures company member and/or client shall timely report to the Exchange in case of any material change to the enterprise or the occurrence of any circumstance adversely affecting the hedging trading qualification. The Exchange may also carry out regular or irregular inspection of the hedging trading client's qualification.

(19) How the client applies for the hedging increase of the general month with respect to more than one (1) contract of the same product?

The client may, through submitting one (1) application sheet, apply for the hedging increase of the general month with respect to more than one (1) contract of the same product.

(20) How the client applies for the hedging increase of the general month with respect to more than one (1) contract of more than one (1) product?

The client may, through submitting more than one (1) application sheet, apply for the hedging increase of the general month with respect to more than one (1) contract of more than one (1) product.

(21) How the client applies for the hedging increase of the delivery month with respect to more than one (1) contract of the same product?

No client may apply for the hedging increase of the delivery month with respect to more than one (1) contract of the same product.

(22) May the client submit the physicals operation performance of the past two years and the physicals operation plan of the following two years?

According to the new hedging rules, the client shall submit the physicals operation performance of the past one year and the physicals operation plan of the following one year, and may submit the physicals operation performance of the past two years and the physicals operation plan of the following two years.

(23) When the contract has a smaller scale, the client applies for and obtains the approved hedging increase of the general month with respect to such contract, which, however, fails to satisfy the client's hedging demands; and when the contract has an expanded scale, must the client re-apply for the hedging increase of the general month with respect to such contract?

The client may submit the hedging demands once for all. When the scale of the contract is expanded, the client may, on the basis of the client's authorization, file an application on its own to the Exchange for expanding the increase without the client's resubmission of the materials.

Contact Us| Disclaimer| Site Map| Search| Related Links
Address:No.129 Huizhan Road, Dalian 116023, China Tel:86-411-84807090Fax:86-411-84808530
?2016Dalian Commodity Exchange. All right reserved.
XML 地图 | Sitemap 地图