DCE Vows to Expand Product Suite as Exchange Aims for Global Leader Position
In an interview with FOW, Jun Li, executive vice president at the Dalian Commodity Exchange, has said the exchange is examining increasing its product suite.
The Chinese commodity exchange’s executive said the product expansion is part of the DCE’s target of becoming “a leading futures trading centre that not only serves the development needs of China’s economy but also has significant global influence.”
Li said the exchange would expand its existing listings with new contracts, though he said he could not divulge which specific commodity products would be introduced.
“We will continue furthering our product development efforts in three series, including agricultural products, oilseeds, and plastics,” Li said.
The exchange lists eight commodity products, with its soymeal, crude soybean oil, and RBD palm oil futures the Chinese exchange’s largest products.
The DCE executive said any new products which the Chinese commodity exchange rolls-out, will meet its criteria for new products. “In developing potential products, we take into great consideration of the risk management needs from these industries. However, the specific product launch time has not yet been determined,” Li said.
While the DCE said that it continues to examine new products, Li said there was room for expansion with its existing product suite. “As for market penetration, there is still plenty of room for us to improve the commercial usage of our existing products,” he added.
The DCE executive said the bourse was aiming to increase trading volumes in its existing products through an incentive trading programme, coupled with increasing the understanding of its products from within the Chinese derivatives market through its own industry events.
The Chinese commodity exchange holds three international conferences, the International Oilseeds Industry Conference, the International Corn Conference and the China Plastics Industry Conference, which Li concluded, “are becoming flagship events in relevant industries in China.”
Li describes the potential of the Chinese derivatives market as “huge”.
“We have only 23 products listed in China’s futures market, and some commodities with much larger underlying spot markets still remain untapped,” Li said.
DCE has enjoyed remarkable success since its inception in 1993. DCE was the largest derivatives exchange in China until 2009, until the Shanghai Futures Exchange listed its hugely successful steel rebar contract. In 2009, the DCE recorded trading volumes of 416.78m contracts, exceeding the 319.16m contracts that were traded in 2008. Leading that success was the exchange’s flagship soy meal futures and soybean oil futures, which were the DCE two leading contracts last year.
However, rather than accepting the success of the DCE, Li said the exchange is hoping to achieve global significance. Li says the exchange has its sights on achieving even greater success, which didn’t necessarily mean targeting increased trading volumes.
“Measured by trading volume alone, DCE is already one of the largest commodity exchanges in the world, but volume is by no means the sole metrics we are after,” Li said. “Compared with leading exchanges in the world, we believe that DCE is still far behind in two key aspects: one is product diversity, and the other is commercial and institutional participation in our market.
“Under the strategic direction of continuously enhancing the economic functions of China’s futures market, we have been trying to address these two issues in order to better serve the ever changing needs of both commercial and non-commercial users,” he concluded.
However, while increasing trading volumes may not the DCE’s primary goal, Li accepts volumes are likely to grow, putting its existing infrastructure under added strain – though the DCE executive said plans are afoot to develop its trading system.
“Explosive volume growth has put significant pressure on our trading platform in terms of both capacity and speed. The maximum number of daily orders we can handled is only 10m, and the average response time is measured by seconds instead of milliseconds,” Li said. “In order to meet future market demands better, we are committed to making significant investments to upgrade our technology infrastructure.”