In 2013, under the leadership of the China Securities Regulatory Commission (CSRC), Dalian Commodity Exchange (DCE) pushed its work in self-discipline and supervision further up to a new level by adhering to the principle of "openness, fairness and justness", fully fulfilling the responsibilities for self-discipline and supervision, focusing on the main line of deregulating and strengthening supervision, relaxing control over market access, reducing trading costs, optimizing market rules and systems, improving the capacity for market supervision, effectively protecting the legitimate rights and interests of investors, ensuring the bottom line of preventing systemic risks, and sparing no efforts to promote the stable, sound and standardized development of the market.
1. Relaxing control over access and simplifying examination and approval, lowering threshold of hedging for clients
In 2013, to further urge the industrial clients to conduct hedging operations through the futures market, after adequately listening to the views of the all parties, DCE optimized the hedging businesses in the aspects of qualification and access, application for quota, examination and approval of quota and system development. First, in the examination and approval of the hedging qualification, we expanded the business of handling the hedging qualification and lowered the threshold for the examination and approval of the qualification. Second, in the process of applying for increasing the hedging quota for common months, we simplified the clients' application materials as the clients do not need to repeat the submission of the application forms and the business performance when applying repeatedly. Third, in the examination and approval of increasing the hedging quota for the near-delivery months, we fully considered the industrial clients' hedging demands in the month before the delivery month to allow the clients to hold the hedging positions of common months until the first section of the first trading day of the delivery month. Fourth, in the modes of hedging application, we put the hedging business system on line and achieved the electronic operations such as quota application, examination and approval of quotas and quota management, facilitating the clients' participation in hedging.
2. Improving structure and encouraging arbitrage, reducing the clients' costs of arbitrage trading
In 2013, to further improve the investors' structure of the futures market and reduce costs of market operation, DCE introduced the measures for the management of arbitrage trading and implemented the positions exemption for the arbitrage trading and the discounts for margin, in a bid to encourage more arbitrage trading on the market. First, we increased the position quota for arbitrage trading. The arbitrage clients may apply to DCE for increasing the position quota, and for the clients with the quota approved, the largest position of a single contract may reach 25% of the unilateral position size of the contract. Second, we implemented the margin discounts for the arbitrage trading. DCE implemented the margin discounts for the positions of calendar spread arbitrage of all listed products and the cross-products arbitrage positions of the designated products and charged the larger value of the position margins for the two contracts in the arbitrage portfolio, thus cutting down the fund costs of the arbitrage clients and improving the trading efficiency on the market.
3. Improving efficiency and reducing costs, optimizing the margin and position limit systems
In 2013, to further improve the efficiency of the market operation and reduce the costs of market operation, DCE cut down the position gradient margin standards and the time gradient margin standards, and optimized the position limits gradient for the near-delivery months. First, in the position gradient margin system, considering the current development of the sizes of market positions, we increased the position gradient of some products and reduced the position gradient margin standards, thus easing the funds pressure of the members of futures companies (hereinafter referred to as "Member") and the clients. Second, in the time gradient margin system, we reduced the margin standards for the month before the delivery month and the delivery month, simplified the increasing gradient of margins for the near-delivery months, and cut down the fund costs of the contracts of near-delivery months. Third, in the position limits gradient of near-delivery months, except the egg futures product, we set up the overall position limit system of the three gradients for common months, the tenth trading day of the month before the delivery month and the delivery month, thus facilitating the clients' management of the positions in the near-delivery month.
4. Supporting development and providing space, relaxing control over position limits of futures company members
In 2013, the market size of positions steadily expanded and the number of clients participating in the market significantly increased. In order to further encourage the Members to expand and strengthen themselves and avoid the loss of clients caused by the Members lacking the speculation position limits, DCE optimized the position limit modes of the Members: first, we carried out the measures of no position limits for the Members with contract positions below certain levels and position limits in proportion for above certain levels of positions. Second, we implemented the measure of no forced position closing for excessive positions of the Members. By optimizing the position limit system of the Members, we relaxed the control over the position limits of the Members, thus providing development space for the Members.
5. Actively judging and closely monitoring, earnestly checking and defusing market risks
In 2013, DCE saw brisk market trading and significant fluctuations of market prices. While relaxing control over the market, DCE intensified the supervision on and the research in the market, and actively defused the market risks, thus ensuring the steady operation of the market. In 2013, DCE maintained normal track of the market operation and the risks, systematically summed up and analyzed the key products such as soybean meal, corn, coke and coking coal and the contracts, and timely adjusted the trading margins and the price limits, thus effectively preventing the market risks. In particular, due to the defects in the market structure, the corn and coking coal-related contracts used to see excessive positions in the near-delivery month. In order to avoid the possible delivery risks, on the one hand, DCE implemented real-time tracking of the clients' positions, thoroughly learned about the clients' delivery intention, fully checked the actual control relationship between the clients, and required the clients to confirm and strengthen the management of the positions of the accounts with actual control relationship; on the other hand, in the process of delivery, DCE actively communicated with delivery warehouses and quality inspection institutions, and required them to effectively prepare for the delivery in terms of warehouse capacity and inspectors. The relevant work achieved certain results, the possible delivery risks for the corn and coking coal-related contracts were effectively resolved and the possible violations were prevented.
6. Intensifying supervision and thoroughly investigating violations, effectively protecting the interests of investors
Supervision over unusual transactions and investigation and treatment of violations are the guarantee of the fair market order as well as important means for protecting the interests of the investors. In 2013, with the attitude of "zero tolerance", DCE intensified the supervision over unusual transactions and violations, severely cracked down on unusual transactions, program trading, matched orders, affecting market prices, rumors and other irregularities, and curbed the early violations, ensuring the stable operation of the market.
In 2013, DCE investigated over 3,300 abnormal market fluctuations, cracked down on 258 abnormal transactions and limited position-opening toward 26 clients. A total of 23,167 clients applied for program transaction to DCE in 2013, till when an accumulated 91,784 clients have applied for program transaction to DCE. In the same year, the screening and identification of 373 groups of actual control relation accounts was completed, and an accumulated 1,528 groups, or 3,963 clients, applied for actual control relation to DCE.
In 2013, DCE cracked down on 98 illegal transactions, punished 162 clients and helped clients saved an economic loss of over RMB 7 million. DCE discovered and submitted 5 investigation cases to the CSRC, among which two were gang fraud which stole funds from other's accounts through bucketing. After these two cases were submitted, DCE vigorously cooperated with the CSRC and the Ministry of Public Security on the investigation, which has played an active role in the successful detection of the cases. Regarding the successively occurred cases of stealing funds from other's accounts through bucketing in the market, DCE actively studied solutions and cooperated with No. 1 Futures Department and No. 2 Futures Department of the CSRC on lots of analyses and researches, which have promoted the implementation of the system of the futures market limiting the outflow of the profits from closing positions and suppressed the occurrence of cases of bucketing and stealing funds. Additionally, regarding the cases of clients reporting and disseminating market rumors, DCE carefully investigated and disposed of relevant cases.
7. Pursuing practical efficiency, carefully investigating and improving qualified operation level of members
In 2013, DCE has, on the basis of summarizing the past experience and regarding the problems found in daily regulation, placed the investigation focus on several aspects as opening accounts in real name, inter-mediator management, and protection of investors' rights and interests, and finished inspection towards 18 members in four areas as north-west, north-east, south-west and south-east. During inspection, DCE screened out those members in the area with the most times of client violations and major operation changes, refined inspection contents into over 20 operation compliance sites, and mainly applied the ways of on-site inspection and sampling inspection, supplemented by self-inspection of members. As practical efficiency was pursued in the inspection on members, and rectifications were required immediately for the deficiencies exited in account opening and return visits, thus raising the daily operation compliance level of members.
8. Penetrating into the frontline, strengthening trainings, and consolidate the protection basis for market investors
In 2013, DCE has, regarding the frequently occurred client violation behaviors in the market, completed the compliant training of over 300 persons of over 60 member units in 5 areas of north-west, north-east, central China, south-west and south-east in the areas the member units located, with the theme of protecting investors' rights and interests and the objective being chief member risk officers and frontline compliance personnels. Relying on the current supervision reality of member size in middle and west region was relatively small, compliant personnels were few and the demand for compliance training was great, DCE instructed its regulation work of daily regulation, compliant inspection, case investigation and actual control relation account management by following the integral work thinking of "supervision, investigation, inspection and training" and through multiple training ways of regulation interpretation, case analysis and prevention measure introduction. The training was welcomed by members, and it's widely believed by the trainees that the training was targeted, substantial and efficient, which has improved the business level of frontline compliant personnels, enhanced members' understanding toward DCE and laid a solid foundation the basis of futures market protecting investors' rights and interests.
9. Seriously researching, actively communicating and enhancing regulation level through the regulation cooperation
The futures market regulatory system, composed of the CSRC, local securities regulatory bureau, exchanges, the regulation center, and the Futures Industry Association, is a favorable guarantee for strengthening regulation cooperation, enhancing supervision efficiency and improving market regulation level. In 2013, DCE actively carried out regulatory cooperation, with the first being strengthening communication with CSRC Inspection Bureau on submitted cases. DCE communicated and cooperated with the CSRC on the submitted cases, such as bucketing and stealing funds from other people's accounts, affecting contract delivery settling prices, and participated in 4 case discussions, thus ensuring the successful progress of the follow-up investigation and detection. Secondly, DCE communicated with the Agency of the Ministry of Public Security in the CSRC, and discussed and boosted the pattern and mechanism of public security departments intervening in investigation of suspected illegal cases in the futures market. Thirdly, DCE participated in the project research organized by the CSRC. DCE has participated in the "Systematic Risk of the Futures Market" organized by No. 1 Futures Department of the CSRC, the "Systematic Risk of the Futures Industry" organized by No. 2 Futures Department of the CSRC, the "Reflection and Reference on the Regulation and Law-enforcement of International Financial Crisis" by the Inspection Bureau of the CSRC, the "Research on the Trend of the Regulation and Law-enforcement of the Manipulation Behaviors in the Capital Market" by the General Inspection Team of the CSRC and so on. Through researching on international market regulation and law-enforcement and sorting out the regulation and law-enforcement of the domestic futures market, DCE learned and referred to the experience of the securities market's regulation and law enforcement, broadened its view, and enhanced its regulation level. Fourthly, in the progress of making risk management system and regulating market, DCE reinforced communication and connection with several units, including the CSRC, exchanges, regulation centers and futures industry associations, improved the scientificity of rules making and the efficiency of the market regulation.
10. Strengthening input, serving the market and enhancing market regulation system construction
In 2013, DCE kept promoting and completing the construction of several business systems, including hedging, arbitrage and market regulation according to the demand of market service and regulation, so as to make the regulation its work more technicalized, systematized and orderly, thus enhanced DCE's risk management service and market regulation skill level. First, in order to coordinate with the release of hedging management measures, DCE actively boosted the construction of electronic hedging application and business management system, which made convenience for clients on the application and transaction of hedging. Second, in order to coordinate with the release of arbitrage trading management measures, DCE actively promoted the construction of arbitrage position holding exemption and favorable margin system, which improved the capital usage efficiency of arbitrage clients. Third, in order to satisfy the demand of market development, DCE boosted the construction of market regulation system, amended indicators that can not satisfy business demands, put forward over 40 new indicators and promoted the construction of several functions as warning and disposal, warning and tracking and statements automation. In addition, DCE also promoted the construction of several market risk management and regulation related system, including position limit, pubic opinion monitoring, favorable hedging group margin, continuous trading, options and new species.
In the Decision of the Central Committee of the Communist Party of China on Major Issues Concerning Comprehensively Deepening Reforms deliberated and approved at the 3ird Plenary Session of the 18th Central Committee of the CPC held in 2013, the strategic decision of "making the market play a decisive role in resource distribution" was put forward, which provided a major opportunity for the continuous and sound development of the futures market. In the Opinions on Further Strengthening the Protection of Legitimate Rights and Interests of Small and Medium-sized Investors in Capital Market issued by the State Council, higher requirements were suggested toward the investor protection of the futures market. Under the new situation, DCE will, under the guidance of marketization, legalization and internationalized regulation and reform, further strengthen market regulation, crack down on illegal behaviors, practically safeguard the legitimate rights and interests of small and medium-sized investors, improve the market service level and make efforts to deliver new contributions and realize new leaps in serving the economic and social development of the country.
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