Insight from Shanghai: China courts international traders with new crude contract

The Shanghai International Energy Exchange’s crude oil futures contract has got off to a good start. The contract’s first expiry at the end of August marked another step on the road to developing a crude futures contract that China hopes will one day stand alongside ICE Brent and NYMEX light sweet crude. The launch of the Shanghai contract on March 26 this year also coincided with the “internationalization” of other Chinese derivatives. Less than two months later, the Dalian Commodity Exchange’s well established iron ore contract was also opened up to international investors. In actual fact, foreign companies have been able to trade Chinese commodity futures onshore for some time. But to do so requires setting up a domestic Chinese entity, with all the associated costs and approvals operating a company in China requires. By internationalizing futures contracts and making it easier for overseas capital to participate directly in price formation in China, the hope is that local exchanges will vie for international influence with incumbents like the Chicago Board of Trade, Intercontinental Exchange and the London Metal Exchange, which host many global agriculture, energy and metals benchmarks. China’s leaders hope not only that Chinese exchanges will become international centers… continue reading

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Source: CTRM Center

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