About Guangzhou Futures Exchange
Guangzhou Futures Exchange is one of the new exchanges from China that is launched in April 2021. The exchange also serves as a part of China’s national goal of the Belt and Road initiative, otherwise also known as the “One Belt, One Road” (一带一路). This is a strategy adopted by the Chinese government to assume greater involvement in global affairs by connecting countries via trade routes or trade products and economic zones. While there are no specifics, it is estimated to contain up to 2600 projects.
As a part of the plan. the exchange aims to establish and explore aspects of the futures market that supports the real economy and green development. This includes exploration into various environmental products such as carbon, ESG indexes, or energy products.
How many Exchanges are there in China?
It is one of the five exchanges that is licensed by the China Securities Regulatory Commission (CSRC) for the trading of derivative products. The other 4 exchanges are Dalian Commodity Exchange, Zhengzhou Commodity Exchange, Shanghai International Energy Exchange, and Shanghai Futures Exchange.
3 Things You Need To Know About Guangzhou Futures Exchange
1. China and the Carbon Market
In 2022, it is reported by IEA that “CO2 emissions are on course to increase by close to 300 million tonnes … to 33.8 billion tonnes – a far smaller rise than their jump of nearly 2 billion tonnes in 2021”. However, this is due to two major market factors. The first is the switch to renewable energy technologies and electric vehicles (EVs) around the world. (Most recently, SGX has also launched a suite of 4 energy metal futures to promote environmental sustainability goals.) The second is the Russian-Ukraine conflict, which forced countries to seek alternative energy resources and significantly dampened expectations for economic growth, notably in Europe. Due to these two factors, CO2 emissions have lessened for the year and carbon footprints are in control temporarily, but the prospects of 2023 and beyond remain uncertain.
Globally, China’s new emissions trading system (ETS) is currently the world’s largest carbon market. Forbes news reports that China’s ETF is about to grow 70 percent under plans to add heavy industry and manufacturing, making it the single largest global climate policy. The carbon and ETS industry are also in their initial stages. The ETS had been released on 16 July 2021, and on its first year anniversary on 16 July 2022, it was recorded that the pricing was rising steadily. Hence, China’s impact on carbon pricing is significant.
Moreover, though the carbon trading market was limited to energy companies, the addition of the Guangzhou Futures Exchange has enabled China to integrate carbon into its business strategies as innovative products.
2. Guangdong-Hong Kong-Macau Greater Bay Area’s Development Plan
As part of the plan drafted in 2019, the greater area development plan was drafted to support Guangzhou in building a pilot zone for green financial reform and innovation and to study the establishment of an innovative futures exchange with carbon emissions as the first variety.
Both parties from the Hong Kong Exchange (HKEX) and Guangzhou Futures Exchange (GFEX) have also signed a memorandum of understanding to develop eventual goals of peak carbon emissions by 2030 and carbon neutrality by 2060. Apart from cross-border agreement, Dalian Commodity Exchange and Guangzhou Futures Exchange have also signed a strategic cooperation framework agreement, which will speed up the exchange growth through resource exchange, business cooperation, market data, exchange seminars, personnel training, and other forms of development.
3. GFEX’s Industrial Silicon Futures and Options Contracts
On December 2022, China also approved the launch of Industrial Silicon Futures and Options Contracts. Though the products are not internationalised yet, the following are the contract specifications:
Industrial Silicon Futures Contract
For the first batch of industrial silicon futures contracts, the months to be listed include SI2308, SI2309, SI2310, SI2311, and SI2312. Starting from January 2023, contracts will be added in a sequential manner every month until the number of listed contracts reaches 8. In the future, the total number of listed trading contracts will be maintained at 8 per day according to the principle of listing one and delisting one until further notice by the Exchange.
Additionally, on the first day of trading, the trading margin of the industrial silicon futures contract is 10% of the contract value, and the price limit is 16% of the listed benchmark price.
The trading margin shall be 10% of the contract value from the next trading day, and the price limit shall be 8% of the settlement price of the previous trading day.
After the settlement of each trading day, the Exchange will release the related trading volume and open interest of the contracts.
The listing benchmark price, delivery region, designated delivery warehouse, designated quality inspection institution, and other matters of the new contract shall be separately notified by the exchange before listing.
Industrial Silicon Futures Contracts are not open for internationalized trade yet, but more details regarding the contract can also be found here on the Orient Futures Linkedin page.
Start Trading With Orient Futures Singapore
Being an Overseas Intermediary of Shanghai International Energy Exchange (INE), Dalian Commodity Exchange (DCE), and Zhengzhou Commodity Exchange (ZCE), when foreign clients participate in internationalized futures contracts in these Chinese markets with us, they have direct access to trading, clearing, and settlement. Our parent company, Shanghai Orient Futures, is the largest broker in terms of aggregated volume across the five regulated exchanges in China.
Orient Futures Singapore also currently holds memberships at the Singapore Exchange (SGX), Asia Pacific Exchange (APEX), and Intercontinental Exchange Singapore (ICE SG).
We provide premium customer service at an affordable cost to all our clients. Our team will be there for you 24 hours on trading days to provide a one-stop portal for all your trades, with simple processes and an intuitive user interface that has low or near-to-zero latency.
