China's Shanghai Futures Exchange said on Tuesday it will relax trading position limits on its product contracts from next year in order to encourage trading activity and increase market participation.
The exchange will relax trading position limits – the number of derivative contracts a trader may own – for 37 futures trading companies that are classified as A-level to 35% from the current 25% for all of its products except contracts on the Shanghai International Energy Exchange (INE).
INE is owned by the Shanghai Futures Exchange with its benchmark crude oil futures contract listed.
A-level classified futures companies are recognised by China's securities regulator as having high risk-management abilities, market competitiveness and well-controlled business risks.
“The adjustment of the position limit aims to enhance futures companies' market risk-management functions … and to promote healthy and stable development of the market," the ShFE said in a statement.
The Shanghai bourse did not give an effective period for the adjustment, but said it will be “normalised", with further adjustments announced annually.
The Shanghai exchange, known for its base metal contracts, offers trading for commodities such as copper, nickel, aluminium and zinc. Its subsidiary bourse the INE, which allows foreign investor participation, lists crude oil and TSR 20 rubber futures and is planning to launch a copper contract next year.
Last year, China's Dalian Commodity Exchange relaxed its risk management restrictions on some futures, including its first internationalised flagship iron ore contracts, in an effort to lure more investors and so boost liquidity.
It doubled the maximum position holding limits for iron ore, soymeal, corn, soybean oil and palm oil contracts.
