The Shanghai Futures Exchange (SHFE) hopes to attract foreign investors to its domestic commodities market.
In 2010, China’s exchanges made up more than half of the volume of commodity derivatives traded worldwide, making it an attractive prospect for global financial institutions. The SHFE hopes to start trading crude futures within the year and then gradually allow foreign investors to trade on other contracts, such as non-ferrous and precious metals. The contracts could be priced either in the dollar or yuan, depending on the State Administration of Foreign Exchange’s position.
At present, foreign investors’ participation in the Chinese commodities market is highly limited, as they are barred from trading on commodities contracts and metals and are compelled to use Chinese brokerages which cannot take positions. While keen to attract investors, the SHFE did not say whether foreigner players would be granted membership to the bourse, or if they would still be required to go through domestic brokerages.
The SHFE is optimistic that the trades will also help Chinese companies cope with fluctuating oil prices and give the developing nation more influence over global pricing. If crude future trades are successful, the SHFE has earmarked the steel sector, including hot-rolled coil, steel plates and iron ore, will be next in line to be opened up to foreign traders.