China launches iron ore and other options to back commodity trade

By Xie Jun and Qi Xijia Source | Global Times

China has just given the long-awaited green light to the trading of new commodity options including iron ore and rapeseed meal, part of a move to enrich the domestic derivatives market to supplement the nation’s expanding commodity trade, experts said on Monday. 

The enrichment of hedging tools like options and futures will pave the way for China to play a more decisive role in pricing commodities, they said. 

The Dalian Commodity Exchange (DCE) received permission from the China Securities Regulatory Commission (CSRC) to launch iron ore options, according to a statement by the CSRC on its official website on Friday. 

On the same day, the CSRC also permitted trading of methyl alcohol and rapeseed meal options on the Zhengzhou Commodity Exchange, and trading of gold options on the Shanghai Futures Exchange. 

This means that China might have a chance to challenge some of the traditional options trading markets such as Singapore, where the bulk of global iron ore options are traded. The policy also gives enterprises access to more risk-hedging tools in their commodity trading. 

“Most of China’s iron ore options were traded over the counter in the past. But because of extreme volatility in iron ore prices this year, enterprises need officially launched derivatives apart from the traditional futures contracts as risk-hedging methods,” Liu Wensheng, deputy director of the ferrous metal department at First Futures, told the Global Times on Monday…Full Story