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City's Futures Exchange unveils energy trading platform
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THE Shanghai Futures Exchange today officially unveiled its designated energy trading platform that will be first used for its proposed crude oil futures trading.
The move is a step toward the launch of the long-awaited energy futures exchange, though officials and securities regulators still didn't give a timetable.
The Shanghai International Energy Exchange is based in the city's new pilot free trade zone, a major testing ground for China's economic reforms, especially in the financial sector.
Vice Mayor Tu Guangshao said the new exchange and the proposed crude futures would be a step forward for China's opening-up of its financial markets, including areas such as yuan convertibility.
A presentation given by Shanghai Futures Exchange Chairman Yang Maijun on Thursday at an industry conference showed the crude futures contracts may be priced in yuan and use the medium sour crude that China commonly imports. Previously, the markets speculated it would have prices in both the yuan and the US dollar.
The local bourse has prepared for years to launch crude contracts, aiming to create a benchmark for Asia as China's crude imports keep rising. Currently, much of the world's crude supply is priced against the futures contracts based on North Sea Brent crude and West Texas Intermediate crude.
The new FTZ in Shanghai, where the government has promised the opening-up of its futures markets to foreign investors gradually, gives the crude plan a major boost.
Currently, China's futures markets are largely off-limits to foreign investors.
However, not everyone is upbeat, raising concerns about problems such as liquidity.
"I doubt there will be lots of demand for hedge because production and imports are both dominated by a few state oil companies," said a senior official at the Shanghai Petroleum Exchange, a spot trading platform for liquefied petroleum gas and natural gas. "For a market, you need buyers and sellers who need crude oil in China. Speculators may become the main player."
The Shanghai Futures Exchange last month launched trading of petroleum bitumen, which is used in road construction. The bitumen futures are seen as a prelude to the launch of the crude futures in Shanghai because they have similar clearing and settlement needs.
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