Dalian Commodity Exchange (“DCE”) announced on May 11 to solicit public opinions on RBD Palm Olein Options Contract (Draft for Comments) and the Measures for Management of Options Trading of Dalian Commodity Exchange (Draft for Comments), suggesting the listing and opening up of RBD palm olein options are high on the agenda.
According to the announcement and the draft contract of RBD palm olein options, the contract type are call and put option; the trading unit is One lot (10 MT) of RBD palm olein futures contract; the minimum tick size is 0.5 CNY/MT; the daily price limit range is the same as that of RBD palm olein futures contract; the contract months include January, February, March, April, May, June, July, August, September, October, November and December; the range of exercise prices is the settlement price of the RBD palm olein futures contract in the previous trading day plus or minus 1.5 times the current day’s price limit: if exercise price ≤ 5,000 CNY/MT, exercise price interval = 50 CNY/MT; if 5,000 CNY/MT < exercise price ≤ 10,000 CNY/MT, exercise price interval = 100 CNY/MT; if exercise price > 10,000 CNY/MT, exercise price interval = 200 CNY/MT. The exercise style is American, which means the options buyer can apply to exercise the options in the trading hours of any trading day prior to the expiration date, and before 3:30 pm on the expiration date.
Given the need to open up options market to overseas investors, the draft of Measures for Management of Options Trading clarifies the rights and responsibilities of overseas investors, Overseas Special Participants, Overseas Intermediaries, Members and the Exchanges in options trading by amending relevant provisions.
Listed on DCE in 2007, RBD palm olein futures is China’s first futures product for solely imported commodity, and opened up to overseas investors in December 2020. With its growing global influence, it has become the largest palm olein futures market worldwide. In China, 70% of palm oil spot trade use the price of RBD palm olein futures on DCE for basis pricing and the palm oil companies accounting for more than 85% of total import have used the futures for hedging. DCE’s palm olein futures has become an indispensable risk management tool for those enterprises.
It is learned that when researching and developing the RBD palm olein options and amending the rules for opening up to overseas investors, DCE has consulted with industry-specific experts, futures companies and risk management subsidiaries, production enterprises and various investors to improve the options contract and the rules. Market participants said that advancing the development of RBD palm olein options research and the opening up to overseas investors is another key measure for China’s futures market to serve the global real economy and that it will further enhance the ability and level of the country’s futures market to serve the global industrial chain.
The drafts released this time imply that the RBD palm olein options shares the same rules with other listed options, with basically the same contract design method. Considering the operation of RBD palm olein futures market, targeted designs have been made in terms of exercise price and intervals, with a view to promote the healthy and stable operation of the market. The trading, clearing and risk control rules of RBD palm olein options when opening up to overseas investors will be consistent with other specified products. The basic rules, core technology system, core clearing and risk control mode will remain unchanged. Going forward, DCE will further improve the contract and rules based on market feedback and lay a solid foundation for the smooth listing and opening up of RBD palm olein options.
Disclaimer: This English translation may be used for reference only. In cases there is any discrepancy between the English version and the original Chinese version, the original Chinese version shall prevail. Dalian Commodity Exchange may change or update this English translation without any prior notice and shall accept no responsibility or liability for damage or loss caused by any error, inaccuracy, misunderstanding, or change with regard to this English translation.
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