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Exchange for crude oil futures bases in free trade zone
Online Edition
The Shanghai Futures Exchange (SHFE) has set up a unit inside the new pilot free trade zone that will be used as a platform for its long-awaited crude oil futures trading.
The Shanghai International Energy Trade Center Co, jointly funded by the SHFE and Shanghai Futures Information Technology Co, a unit of the exchange, was established after being approved by the Shanghai Administration for Industry & Commerce on November 6.
The Shanghai International Energy Trade Center has a registered capital of 5 billion yuan (US$821 million), making it the largest financial company set up in the FTZ so far.
The new center will become China’s fifth national futures exchange, joining the SHFE, the Zhengzhou Commodity Exchange, the Dalian Commodity Exchange and the China Financial Futures Exchange, according to a statement on the website of the Shanghai commerce administration.
The SHFE has prepared for years to launch a new crude contract, 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 SHFE’s crude plan a major boost. The zone is seen by many as a testing ground for China’s economic reforms, especially in the financial sector.
Bao Jianping, vide director of the Shanghai Institute of Futures and Derivatives under the SHFE, said the exchange plans to use the new center as an opportunity to open up China’s futures markets and introduce the futures trading of other energy products such as natural gas in the future, he said.
He confirmed the proposed crude contract will be priced in both the yuan and the US dollar.
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