Lokesh Madan Lokesh Madan is a strategy business consultant for various high frequency trading companies worldwide with more than 12 years of experience in financial technology, research work and business development

China Commodities Market Unleashed.

3 min read

China commodities market Unleashed.

 

  • Yes any non Chinese can access SHFE .. There are Two Ways of Accessing China Market.
  • To setup Company at China need 1.5 to 2 months Time with 25K – 35K USD or you can do via offshore way.
  • Transaction costs are on Lower side.
  • Precious & Non Precious Metal lots are Very much liquid.
  • Currency already packed.
  • Excellent parity CME & SHFE.
  • There are various Software’s those have CME & SHFE active.
  • We provide demo account if you want.
  • No Capital Gain taxes.
  • Right now Third most liquid Exchange in commodities world seems to be SHFE.

 

 Price Discovery

Bullion (Gold and Silver)
Right now COMEX seems to be more dominant then other world Commodities Exchanges. So Discovery of price for Bullion comes from COMEX.

Metal (Aluminum, Copper and Zinc)
For metals LME seems to play the dominant role, followed by Other Commodities Exchanges.

Energy (Crude & Natural gas)
For Crude : We Found that ICE is the most dominant platform followed by NYMEX.

For Natural gas : We Found that NYMX is the most dominant platform.

INTRODUCTION

Shanghai Futures Exchange (SHFE) is organized under relevant rules and regulations. A self-regulated entity, it performs functions that are specified in its bylaws and state laws and regulations. It is regulated by the China Securities Regulatory Commission (CSRC). At present, futures contracts’ underlying commodities, i.e., gold, silver, copper, aluminum, lead, steel rebar, steel wire rod, natural rubber, fuel oil and zinc, are listed for trading.

 
Guided by the Concept of Scientific Development, Shanghai Futures Exchange commits itself to promoting the opening-up and continued progress of the capital market and construction of a harmonious market environment. SHFE adheres to the guidelines that are generalized as “legislation, supervision, self-regulation and standardization”, with stability, development and innovation as a priority. The exchange organizes trading activities strictly according to the laws and rules, and fulfills its functions as a front-line regulator. SHFE endeavors to develop itself into a regulated, efficient, transparent and product-inclusive internationalized futures exchange that focuses on the metal, energy and chemical-related industrial products and the corresponding derivatives. In order to realize the functions of the futures market as price discovery and risk hedging, and serve the development of the national economy, Shanghai Futures Exchange is establishing a secure, orderly, efficient market mechanism and an open, fair, equitable and transparent market environment.

For copper , silver & zinc it stand in top 20 exchanges as per volumes are concern in Year 2011 till 2014.

If want to start your Trading Desk at China & want to trade SHFE?.

Major Points to understand.

As a non China Resident is it possible to Trade at china exchange. Any non Chinese can not open account right now directly. But there are two ways to do trading at China.

Two Ways of Accessing China Market

Major part – Open your own company here or make one partner here & trade.

1. Cross-border Cooperation with a Chinese CompanyManaged Account
2. Set up a Company in China.

1) Wholly Foreign Owned Entity (WFOE) is a company invested by foreigners.

It takes about 1-1.5 months to finish all the procedures to register a WFOE. We could help find relevant legal consultant to do that for overseas clients.

Cost: 20-25 thousands USD.

2) Capital injected into the WFOE could not be directly used to trade futures.

So the WFOE should do some physical trading to generate CNY(onshore RMB) revenue. These revenues could be used to trade futures.

And in Shanghai Free Trade Zone, you don’t even need to rent an actual office to register a company. They will give you a post box address. So the operation cost is actually low.

Broker could help finding reliable physical trading counterparties, which are also our clients.

Actually broker helped several big overseas trading firm to enter China market through this way.

All the revenues could be paid to overseas shareholder through paying dividend each year.

Advantage:

-Potential chance to gain profits from doing physical trading.
-Chance to gain interest spread in China.

(Official deposit rate in China is 3.5%, which is higher than overseas market.)

Disadvantage: Take more time, efforts and cost to set up.

3) When you have a WFOE, you could use the WFOE to open bank account in China, Some Hongkong financial companies provide services to transfer offshore USD into China.

These financial companies have both onshore and offshore assets. Client give USD to offshore account of these financial companies. And they will give onshore RMB to client’s WFOE bank account.

The transfer could be done in 10-20 minutes. Of course the financial companies earn some profit through exchange rate. Basically this is very convenient. But if client choose this way, we suggest them transfer money several times in small amount, which could protect them from counterparty risk.

Future commodities products – Precious Metals / Non Precious metal / Energy Products – Contract Details – complete details size / Months available / In which currency it run / Margin requirements per contract.

How anyone can hedge china currency with USD.

Currency Trading is not allowed at china. For that u can use NDF from bank .Important part is that gap between USD & RMB is packed so no big movement.

But you can find

CME has CNH futures, but it is offshore RMB

Market Data Providers

Yes you can get market data from world top data providers i.e Thomson Reuters, Bloomberg, Interactive Data many other. For analysis you can get the data from Exchange website – Delayed data , Day data , Weekly data , Monthly data & annual statistics.

Trading Hours.
9:00-11:30 am, 13:30- 3:00 pm Beijing time

Any minimum requirements to open account Funds with broker & minimum volume required.
50000 USD no minimum limit for volume

What all software available here to trade at SHFE.
Most of brokers have their own applications – Free of cost. Third party software’s i.e CQG/RTS are there

If some one have its own set of Order management system then how he can connect with Exchange.

FIX API Broker provides & its utilization is free of cost.

Do SHFE provide Paper test environment for their clients?
Paper test available & free of cost. No need to open account. Your broker can help u in that.

SHFE offer: Colocation or proximity colocation

-Yes they have Data Centre
-Racks are available you have to provide your own servers. They provide on 1U    space basis.

 How you connect us with that server

Currently SHFE is not connected through Leased lines to other exchanges so not offer leased line access yes you can access using Internet VPN.
SHFE is located at Shanghai

Brokerage Charges. Depend upon Volume you create..

Taxes – No capital gain taxes.

Lokesh Madan

For Complete details : visit http://algotradingindia.blogspot.in/2014/08/china-new-future-commodities-trading.html

Lokesh Madan Lokesh Madan is a strategy business consultant for various high frequency trading companies worldwide with more than 12 years of experience in financial technology, research work and business development

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